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Approximate Quantal Response Equilibria in Bargaining

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  • Luis G. Gonzalez

Abstract

The Nash Bargaining problem in the context of a random utility model yields a stochastic demand for each player, conditional on his or her beliefs regarding the other player's behavior. We derive a symmetric logit equilibrium under naive expectations that converges to the Nash axiomatic solution as noise in utility vanishes. A numerical approximation to the symmetric logit equilibrium under rational expectations (Quantal Response Equilibrium) solution is also computed.

Suggested Citation

  • Luis G. Gonzalez, 2005. "Approximate Quantal Response Equilibria in Bargaining," Papers on Strategic Interaction 2005-01, Max Planck Institute of Economics, Strategic Interaction Group.
    • Handle: RePEc:esi:discus:2005-01
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    4. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
    5. McKelvey Richard D. & Palfrey Thomas R., 1995. "Quantal Response Equilibria for Normal Form Games," Games and Economic Behavior, Elsevier, vol. 10(1), pages 6-38, July.
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