Tom Schelling was a US American economist (born April 14, 1921); until his death yesterday (Aussie time) he was Distinguished Professor of Economics at the University of Maryland, College Park. He was awarded the 2005 Nobel Memorial Prize in Economic Sciences which he shared with Robert Aumann, a belated completion of the NASH quartet that was not possible in 1994 because the Nobel Prize is given to maximally three people.

Schelling was awarded the Nobel Prize mainly “for having enhanced our understanding of conflict and cooperation through game-theoretic analysis”. This is true to the extent that he typically thought about interdependent decisions, i.e., decisions whose outcomes depend on the decisions of others. Schelling wanted game theorists to pay more attention to strategic uncertainty, issues such as promises and threats, strategies of credible commitments, tacit bargaining, the role of communication, and the design of enforceable contracts and rules. Schelling is probably right in saying (as he did in the biographical sketch that he supplied to the Nobel Prize Committee) that his work in this area – at least initially – did not have noticeable influence on game theorists but that it reach sociologists, political scientists, and some economists. His interests in such issues were in the first couple of decades clearly motivated by his having one foot in academia and the other firmly in various policy making bodies. He ended his work for the government upon the U.S. invasion of Cambodia in the Spring of 1970 but in later years took up important advisory and consulting activities.

Schelling wrote numerous widely cited articles which were the basis for the half dozen books that he wrote. These are Schelling (1960, 1961, 1966), Schelling (1978), and Schelling (1984, 2006). The first three – as also suggested by their title – deal with strategic interaction between entities such a nations but Schelling (1960) is a very fundamental, and eminently readable, treatise that tries to inject new themes into game theory. Almost three decades later it inspired a literature on what is now known as coordination games (Devetag & Ortmann 2007). Schelling (1978) provides models of racial dynamics that are as insightful as they are simple – Schelling’s work is almost always non-technical — and elegant. He showed specifically how seemingly fairly innocent micro-motives could bring about undesirable macro-outcomes. This particular work is said to have inspired what is now known as agent-based computational economics. Schelling (1984) is dedicated to issues of self-command and Schelling’s interest in substance abuse and addictive behavior; this interest guided much of his research in the seventies and eighties. The strategic interaction between competing selves is at the heart of his personalized narratives of strategic conflict. Schelling (2006) covers all aspects of his work and in this sense is the idea starting point for an exploration of the astonishing range of ideas pursued by this very public intellectual. The book contains also three essays on climate change, and related collective action problems, that interested him since 1980. Schelling is on record as saying that “global warming and climate change is what I expect to be, during this century, what nuclear arms control was during the century past, namely an immense challenge to ‘cooperation amid’ conflict.” His solution to climate change – geoengineering rather than a world-wide cap and trade system – is controversial.

The above entry has been culled, with slight modifications, from Morris Altman’s Encyclopedia of Behavioral Decision Making (Praeger 2015)

See also: Strategic Uncertainty, Coordination games, Theory of conflict, Self-command

Further Reading:

Devetag, Giovanna and Andreas Ortmann. 2007. “When and Why? A Critical Review of Coordination Failure in the Laboratory.” Experimental Economics 10, 2007, 331 – 44.

Ortmann, Andreas and Angelika Weber. 2007. “Thomas Schelling und die Theorie der Self-Command,” Pp.121 – 34 in Ingo Pies and Martin Leschke (eds), Thomas Schellings strategische Ökonomik. Tübingen: Mohr-Siebeck, 2007.

The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2005:

Biographical http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2005/schelling-bio.html

Press release http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2005/press.html

Avanced information http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2005/advanced-economicsciences2005.pdf

Schelling, Thomas. 1960. The Strategy of Conflict. Cambridge, MA: Harvard University Press.

Schelling, Thomas and M.H. Halperin. 1961. Strategy and Arms Control. New York: Twentieth

Century Fund.

Schelling, Thomas. 1966. Arms and Influence. New Haven, CT: Yale University Press.

Schelling, Thomas. 1978. Micromotives and Macrobehavior. Cambridge, MA: Harvard

University Press.

Schelling, Thomas. 1984. Choice and Consequence. Cambridge, MA: Harvard University Press.

Schelling, Thomas. 2006. Strategies of Commitment and Other Essays. Cambridge, MA:

Harvard University Press.

Zeckhauser, Richard (1989): “Reflections on Thomas Schelling”, in: Journal of Economic

Perspectives 3, S. 153–64.