Strategic behaviour in Schelling dynamics: Theory and experimental evidence

• We model a spatial segregation model with moving costs.
• We analyse the subgame perfect equilibria for our model with and without moving cost.
• Under moving costs framework, the full segregated configuration is not an equilibrium.
• We design a lab experiment to contrast theoretical outcomes.
• Empirically, the existence of strategic players leads to less segregated societies.

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 behaviour 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 full segregated societies notably decreases with the cost of moving and that the degree of segregation depends on the distribution of strategic subjects.