Schelling Point

Written by Alex Gedevani

Introduction

Schelling point is a game theory concept made famous by Thomas Schelling in his book, The Strategy of Conflict. Schelling point is the solution that people will tend to use in the absence of communication, because it seems natural or special to them. AsNaval points out, it’s about multiplayer coordination games where people respond based on what they think the other person’s response will be. Schelling points can be found in many facets of life.

Thomas Schelling’s experiment with a group of students began with a simple question, “Tomorrow you have to meet a stranger in NYC. Where and when do you meet them?”. The most common answer was Noon at Grand Central.

For example, across business or art or politics, you can find a Schelling point within the context of the game. In the crypto industry,Bitcoin’s 21 million coin limit is a Schelling point. It’s arbitrary however Bitcoin’s history makes 21 the converging point.

Another scenario around picking numbers from a group fits the framework. If tasked to pick a number from 25442502, 59828939, 10000000, and 90515552, the common answer would be 10000000. Why? The number jumps out in comparison to the others. The uniqueness results in a natural convergence point.

Suggested Reading

On Schelling points, network effects and Lindy: Inherent properties of communication by Willem Van Den Bergh

Nash Equilibria and Schelling Points by Scott Alexander

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