Strategic behaviour in Schelling dynamics: Theory and experimental evidence

In this paper we experimentally test Schelling's (1971) segregation model and confirm the striking result of segregation. In addition, we extend Schelling's model theoretically by adding strategic behavior and moving costs. We obtain a unique subgame perfect equilibrium in which rational agents facing moving costs may find it optimal not to move (anticipating other participants' movements). This equilibrium is far from full segregation. We run experiments for this extended Schelling model, and find that the percentage of strategic players dramatically increases with the cost of moving and that the degree of segregation depends on the distribution of strategic subjects.