Focal Points in Framed Games

This book introduces a new rationalistic approach towards the formalization of Schelling's concept of focal points within a general game-theoretic framework. The focus is on focal points as a symmetry-breaking device. Hence, focal points in coordination games can be explained while focal points in bargaining are out of reach. Strategic/extensive games are extended into framed strategic/extensive games (FSGs/FEGs) by adding a structure-frame - which represents the player's perception of their strategies/actions by assigning a multi-demensional label to each strategy/action. A language invariance requirement similar to Harsanyi & Selten's invariance with respect to isomorphisms then ensures a solution's independence from the game theorist's (arbitrary) choice of these labels. In many interesting cases, focal points can be characterized as the unique payoff-dominant language-invariant equilibria of the underlying framed games.