Roads, Public Goods, and Focal Points
The Answer Is Transaction Costs
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The Role of Coordination in Coordination
In his 1960 book, The Strategy of Conflict, Thomas Shelling came up with the idea of what he called a focal point. He argued that people's ability to coordinate without communicating was key to understanding how real life strategic games are solved. Mike: Can you think of examples of the same kind of dynamic in more traditional markets? Are there scenarios where transactions cost actually lead to better outcomes because they create stickiness like brand loyalty? We'll discuss all that and more next week on TIDC.
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