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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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File URL: http://www.sciencedirect.com/science/article/pii/S0899825612001522
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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. Eric Maskin & Tomas Sjostrom, 2001. "Implementation Theory," Economics Working Papers 0006, Institute for Advanced Study, School of Social Science.
  2. 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.
  3. repec:fth:calaec:6-98 is not listed on IDEAS
  4. C. Monica Capra, 1999. "Anomalous Behavior in a Traveler's Dilemma?," American Economic Review, American Economic Association, vol. 89(3), pages 678-690, June.
  5. 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.
  6. 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.
  7. Matsushima, Hitoshi, 1988. "A new approach to the implementation problem," Journal of Economic Theory, Elsevier, vol. 45(1), pages 128-144, June.
  8. Antonio Cabrales & Giovanni Ponti, 2000. "Implementation, Elimination Of Weakly Dominated Strategies And Evolutionary Dynamics," Working Papers. Serie AD 2000-18, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  9. 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.
  10. Tumennasan, Norovsambuu, 2013. "To err is human: Implementation in quantal response equilibria," Games and Economic Behavior, Elsevier, vol. 77(1), pages 138-152.
  11. Cabrales, Antonio, 1999. "Adaptive Dynamics and the Implementation Problem with Complete Information," Journal of Economic Theory, Elsevier, vol. 86(2), pages 159-184, June.
  12. Jackson, Matthew O., 1999. "A Crash Course in Implementation Theory," Working Papers 1076, California Institute of Technology, Division of the Humanities and Social Sciences.
  13. Abreu, Dilip & Sen, Arunava, 1991. "Virtual Implementation in Nash Equilibrium," Econometrica, Econometric Society, vol. 59(4), pages 997-1021, July.
  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. 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.
  16. 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.
  17. 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.
  18. William H. Sandholm, 2005. "Negative Externalities and Evolutionary Implementation," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 885-915.
  19. Kfir Eliaz, 2002. "Fault Tolerant Implementation," Review of Economic Studies, Oxford University Press, vol. 69(3), pages 589-610.
  20. Eric Maskin, 1999. "Nash Equilibrium and Welfare Optimality," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 23-38.
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