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To Err is Human: Implementation in Quantal Response Equilibria

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  • Norovsambuu Tumennasan

    ()
    (Department of Economics and Business, Aarhus University, Denmark)

Abstract

We study the classical implementation problem when players are prone to make mis- takes. To capture the idea of mistakes, Logit Quantal Response Equilibrium (LQRE) is used, and we consider a case in which players are almost rational, i.e., the sophisti- cation level of players, delta, approaches infinity. We show that quasimonotonicity, a small variation of Maskin Monotonicity, and no worst alternative conditions are necessary for restricted Limiting LQRE (LLQRE) implementation. Moreover, these conditions are sufficient for both restricted and unrestricted LLQRE implementations if there are at least three players and each player's worst alternative set is constant over all states.

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Bibliographic Info

Paper provided by School of Economics and Management, University of Aarhus in its series Economics Working Papers with number 2011-11.

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Length: 32
Date of creation: 12 Sep 2011
Date of revision:
Handle: RePEc:aah:aarhec:2011-11

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Web page: http://www.econ.au.dk/afn/

Related research

Keywords: implementation; mechanisms; bounded rationalitym; quantal response equilibria;

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References

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  1. Eric Maskin, 1998. "Nash Equilibrium and Welfare Optimality," Harvard Institute of Economic Research Working Papers 1829, Harvard - Institute of Economic Research.
  2. Eliaz, K., 1999. "Fault Tolerant Implementation," Papers 21-99, Tel Aviv.
  3. Jacob K. Goeree & Charles A. Holt & Thomas R. Palfrey, 2000. "Quantal Response Equilibrium and Overbidding in Private-Value Auctions," Virginia Economics Online Papers 345, University of Virginia, Department of Economics.
  4. Matthew O. Jackson, 2001. "A crash course in implementation theory," Social Choice and Welfare, Springer, vol. 18(4), pages 655-708.
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  7. Roberto Serrano, 2003. "The Theory of Implementation of Social Choice Rules," Working Papers 2003-19, Brown University, Department of Economics.
  8. William H. Sandholm, 2005. "Negative Externalities and Evolutionary Implementation," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 885-915.
  9. Goeree, Jacob & Palfrey, Thomas & Rogers, Brian & McKelvey, Richard, 2004. "Self-correcting Information Cascades," Working Papers 1197, California Institute of Technology, Division of the Humanities and Social Sciences.
  10. Matsushima, Hitoshi, 1988. "A new approach to the implementation problem," Journal of Economic Theory, Elsevier, vol. 45(1), pages 128-144, June.
  11. Antonio Cabrales, 1996. "Adaptive dynamics and the implementation problem with complete information," Economics Working Papers 179, Department of Economics and Business, Universitat Pompeu Fabra.
  12. Anderson, Simon P. & Goeree, Jacob K. & Holt, Charles A., 2001. "Minimum-Effort Coordination Games: Stochastic Potential and Logit Equilibrium," Games and Economic Behavior, Elsevier, vol. 34(2), pages 177-199, February.
  13. Antonio Cabrales & Giovanni Ponti, . "Implementation, Elimination of Weakly Dominated Strategies and Evolotionary Dynamics," ELSE working papers 057, ESRC Centre on Economics Learning and Social Evolution.
  14. C. Monica Capra, 1999. "Anomalous Behavior in a Traveler's Dilemma?," American Economic Review, American Economic Association, vol. 89(3), pages 678-690, June.
  15. Jacob K Goeree & Charles A Holt, 2004. "Ten Little Treasures of Game Theory and Ten Intuitive Contradictions," Levine's Working Paper Archive 618897000000000900, David K. Levine.
  16. Jackson, Matthew O, 1992. "Implementation in Undominated.Strategies: A Look at Bounded Mechanisms," Review of Economic Studies, Wiley Blackwell, vol. 59(4), pages 757-75, October.
  17. Maskin, Eric & Sjostrom, Tomas, 2002. "Implementation theory," Handbook of Social Choice and Welfare, in: K. J. Arrow & A. K. Sen & K. Suzumura (ed.), Handbook of Social Choice and Welfare, edition 1, volume 1, chapter 5, pages 237-288 Elsevier.
  18. Norovsambuu Tumennasan, 2011. "To Err is Human: Implementation in Quantal Response Equilibria," Economics Working Papers 2011-11, School of Economics and Management, University of Aarhus.
  19. Cabrales, Antonio & Serrano, Roberto, 2011. "Implementation in adaptive better-response dynamics: Towards a general theory of bounded rationality in mechanisms," Games and Economic Behavior, Elsevier, vol. 73(2), pages 360-374.
  20. Kfir Eliaz, 2002. "Fault Tolerant Implementation," Review of Economic Studies, Oxford University Press, vol. 69(3), pages 589-610.
  21. Abreu, Dilip & Sen, Arunava, 1991. "Virtual Implementation in Nash Equilibrium," Econometrica, Econometric Society, vol. 59(4), pages 997-1021, July.
  22. Simon P. Anderson & Jacob K. Goeree & Charles A. Holt, 1998. "Rent Seeking with Bounded Rationality: An Analysis of the All-Pay Auction," Journal of Political Economy, University of Chicago Press, vol. 106(4), pages 828-853, August.
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Citations

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Cited by:
  1. Tumennasan, Norovsambuu, 2013. "To err is human: Implementation in quantal response equilibria," Games and Economic Behavior, Elsevier, vol. 77(1), pages 138-152.
  2. Ludovic Renou & Karl H. Schlag, 2009. "Implementation in Minimax Regret Equilibrium," Discussion Papers in Economics 09/24, Department of Economics, University of Leicester.

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