A THEORY OF FOCAL POINTS

The paper presents a theoretical framework which distinguishes between the strategic structure of a game (the 'existential game') and the way the players describe the game to themselves. Each player works with a private description of the game, in which strategies are identified by labels; labels are generated by a stochastic labelling procedure. Each player chooses a decision rule which, for each possible private description, picks one of the available strategy labels. A criterion of collective rationality is applied to choices among decision rules. The implications of collective rationality are explored for a range of games with different labelling procedures.