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Quantal response equilibrium in a double auction

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  • Claudia Neri

    (University of St.Gallen)

Abstract

This paper establishes existence and uniqueness of Quantal Response Equilibrium (QRE) in a double auction. The concept of QRE has the intuitive property that a deviation from best response is less likely the higher the cost associated with the deviation itself. Thanks to such property, the QRE accommodates stochastic elements in the analysis of the strategic decision-making that arises in the double auction. By providing a theoretical alternative to the Bayesian Nash Equilibrium model, the QRE model offers an appealing tool for analyzing data of double auction experiments.

Suggested Citation

  • Claudia Neri, 2015. "Quantal response equilibrium in a double auction," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 3(1), pages 79-90, April.
    • Handle: RePEc:spr:etbull:v:3:y:2015:i:1:d:10.1007_s40505-014-0038-4
    DOI: 10.1007/s40505-014-0038-4
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    References listed on IDEAS

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    Cited by:

    1. Changping Zhao & Yecheng Wang & Tianxiang Zhang & Qingbo Huang & Yu Gong, 2019. "The Game Simulation of “The Belt and Road” Economic and Trade Network Based on the Asymmetric QRE Model," Sustainability, MDPI, vol. 11(12), pages 1-17, June.

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