Waverly lives in San Francisco's Chinatown in a two-bedroom apartment above a Chinese bakery that makes dim sum and pastries. Tan writes, "By daybreak, our flat was heavy with the odor of fried sesame balls and sweet curried chicken crescents." The flavors of the bakery float up to Waverly's apartment. 

The neighborhood is crowded with people of all ages. Down the block from Waverly's apartment there is a playground with slides that have been shined from heavy use. People born in China sit on benches around the playground eating watermelon seeds and giving their husks to pigeons. There are many fascinating stores in the neighborhood, such as the medicine shop and fish market that sells crabs and frogs. There is also a cafe at which tourists are not welcome, as the menu is printed in Chinese. 

It's a neighborhood in which people know each other. On Saturdays, when Waverly accompanies her mother to attend market days, her mother tells everyone about her daughter. This type of bragging annoys Waverly, who wants to escape from her cloistered environment. 

Waverly resides in Chinatown San Francisco with her mother and two brothers. The population of Chinatown is comprised of poor Chinese immigrants.  The community is close knit and the streets in Chinatown are busy with numerous business establishments such as the herbal medicine shop, the printer and the fish market, all situated along the same street. Waverly’s family apartment itself is located on top of a bakery. The dark alley and playground with old swings and slides are stationed behind Waverly's family apartment.This description gives a sense of overcrowding.

The neighborhood is filled with items that represent the Chinese culture which the inhabitants of the town have strived to preserve. This rich cultural heritage has become a major tourist attraction. From the architecture with pagoda roofs, the language, temples and customs to the treatment of ailments using traditional herbs all signify cultural preservation. In fact, the insistent use of Chinese language in a restaurant menu has acted to repel tourists visiting the town.

Waverly’s neighborhood is in San Francisco’s Chinatown. The family occupies a two-bedroom flat above a bakery on Waverly Place, the street that inspired Waverly’s name. Waverly and her brothers enjoy playing in the alley behind their building.

At the end of our two-block alley was a small sandlot playground with swings and slides well-shined down the middle with use. …The best playground, however, was the dark alley itself.

Also in the neighborhood is a shop that sells medicinal herbs, a printer’s shop, and a fish market. There is also a small restaurant that tourists stay away from because the menu is printed only in Chinese. At the end of the alley is the First Chinese Baptist Church, where Waverly’s brother got his chess set at the Christmas party.

In the beginning of the story, Waverly introduces us simultaneously to Chinese culture and to her neighborhood. We learn about Waverly’s mother, about how the shopkeepers feel, and about how the people of Chinatown feel about tourists. This gives us a better understanding of the role chess will play in Waverly’s life and in the neighborhood.

Describe Waverly's neighborhood in "Rules of the Game".  

Aside from the venues for the chess tournaments, and aside from the private apartment where the Jongs live, their neighborhood is the central setting for this story and its welcoming, vibrant sense of cultural belonging is crucial for Waverly, her brothers, and her mother.

This neighborhood is full of apartments and stores, some indoors and some in an outdoor marketplace, in San Francisco's China Town, where familiar Chinese foods are readily available for Waverly's family, both for purchase and in restaurants. Curio shops and medicinal herb shops are safe places for Waverly to wander. A Chinese bakery sits just below Waverly's apartment and it fills her living space with delicious and familiar smells. Swings, slides, and even back alleys constitute a playground for Waverly and the other neighborhood Chinese children. Old Chinese women feed pigeons; in fact, social life that takes place out of doors is one constant in this neighborhood. Chinese men play chess in the park and welcome Waverly to their games; Lau Po, a player there, calls her "Little Sister" before getting to know her. This kind of welcoming friendliness of a cultural community envelops Waverly and her mother. Mrs. Jong (Waverly's mom) is so comfortable in this environment that she speaks to anyone who even looks at her, introducing her daughter to them proudly.

More details about the sights, sounds, and smells of Waverly's neighborhood can be found near the beginning of the story, from about the fourth through the seventh paragraphs.