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On the Empirical Content of Quantal Response Equilibrium

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  • Philip A. Haile
  • Ali Hortaçsu
  • Grigory Kosenok

Abstract

The quantal response equilibrium (QRE) notion of Richard D. McKelvey and Thomas R. Palfrey (1995) has recently attracted considerable attention, due in part to its widely documented ability to rationalize observed behavior in games played by experimental subjects. However, even with strong a priori restrictions on unobservables, QRE imposes no falsifiable restrictions: it can rationalize any distribution of behavior in any normal form game. After demonstrating this, we discuss several approaches to testing QRE under additional maintained assumptions. (JEL C72, D84)

Suggested Citation

  • Philip A. Haile & Ali Hortaçsu & Grigory Kosenok, 2008. "On the Empirical Content of Quantal Response Equilibrium," American Economic Review, American Economic Association, vol. 98(1), pages 180-200, March.
    • Handle: RePEc:aea:aecrev:v:98:y:2008:i:1:p:180-200
    Note: DOI: 10.1257/aer.98.1.180
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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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