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On the Empirical Content of Quantal Response Equilibrium

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  • Philip A. Haile

    ()
    (Department of Economics and Cowles Foundation, Yale University, and NBER)

  • Ali Hortacsu

    ()
    (University of Chicago and NBER)

  • Grigory Kosenok

    ()
    (NES)

Abstract

The quantal response equilibrium (QRE) notion of McKelvey and 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.

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Bibliographic Info

Paper provided by Center for Economic and Financial Research (CEFIR) in its series Working Papers with number w0076.

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Length: 27 pages
Date of creation: Aug 2006
Date of revision:
Handle: RePEc:cfr:cefirw:w0076

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Keywords: quantal response equilibrium; falsifiability; testable restrictions; regular quantal response equilibrium; rank-cumulative probabilities; Block-Marschak polynomials;

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