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To err is human: Implementation in quantal response equilibria

  • Tumennasan, Norovsambuu

We study the implementation problem when players are prone to make mistakes. 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 sophistication level of players approaches infinity. We show that quasimonotonicity, a small variation of Maskin monotonicity, and no worst alternative are the necessary conditions for restricted Limit LQRE (LLQRE) implementation. Moreover, these conditions are sufficient for both restricted and unrestricted LLQRE implementations if there are at least three players and if at least one player has a state-independent worst alternative.

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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 77 (2013)
Issue (Month): 1 ()
Pages: 138-152

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Handle: RePEc:eee:gamebe:v:77:y:2013:i:1:p:138-152
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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  1. Cabrales, Antonio, 1999. "Adaptive Dynamics and the Implementation Problem with Complete Information," Journal of Economic Theory, Elsevier, vol. 86(2), pages 159-184, June.
  2. Eric Maskin, 1998. "Nash Equilibrium and Welfare Optimality," Harvard Institute of Economic Research Working Papers 1829, Harvard - Institute of Economic Research.
  3. William H. Sandholm, 2005. "Negative Externalities and Evolutionary Implementation," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 885-915.
  4. Abreu, Dilip & Sen, Arunava, 1991. "Virtual Implementation in Nash Equilibrium," Econometrica, Econometric Society, vol. 59(4), pages 997-1021, July.
  5. Jacob K. Goeree & Charles A. Holt, 2000. "Ten Little Treasures of Game Theory and Ten Intuitive Contradictions," Virginia Economics Online Papers 333, University of Virginia, Department of Economics.
  6. 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.
  7. Palfrey, Thomas R. & Goeree, Jacob & Holt, Charles, 2000. "Quantal Response Equilibrium and Overbidding in Private-value Auctions," Working Papers 1073, California Institute of Technology, Division of the Humanities and Social Sciences.
  8. 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.
  9. Jacob K. Goeree & Thomas R. Palfrey & Brian W. Rogers & Richard D. McKelvey, 2006. "Self-Correcting Information Cascades," Levine's Bibliography 321307000000000211, UCLA Department of Economics.
  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 & Giovanni Ponti, . "Implementation, Elimination of Weakly Dominated Strategies and Evolotionary Dynamics," ELSE working papers 057, ESRC Centre on Economics Learning and Social Evolution.
  12. Eric Maskin & Tomas Sjostrom, 2001. "Implementation Theory," Economics Working Papers 0006, Institute for Advanced Study, School of Social Science.
  13. Matthew O. Jackson, 2001. "A crash course in implementation theory," Social Choice and Welfare, Springer, vol. 18(4), pages 655-708.
  14. Roberto Serrano, 2003. "The Theory of Implementation of Social Choice Rules," Economics Working Papers 0033, Institute for Advanced Study, School of Social Science.
  15. Kfir Eliaz, 2002. "Fault Tolerant Implementation," Review of Economic Studies, Oxford University Press, vol. 69(3), pages 589-610.
  16. repec:bla:restud:v:74:y:2007:i:3:p:733-762 is not listed on IDEAS
  17. Matthew 0. Jackson, 1989. "Implementation in Undominated Strategies - A Look at Bounded Mechanisms," Discussion Papers 833, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  18. C. Monica Capra, 1999. "Anomalous Behavior in a Traveler's Dilemma?," American Economic Review, American Economic Association, vol. 89(3), pages 678-690, June.
  19. Eliaz, Kfir, 2002. "Fault Tolerant Implementation," Review of Economic Studies, Wiley Blackwell, vol. 69(3), pages 589-610, July.
  20. 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.
  21. repec:fth:calaec:6-98 is not listed on IDEAS
  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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