Equilibrium notions and framing effects
Experimental economics has repeatedly demonstrated that the Nash equilibrium makes inaccurate predictions for a vast set of games. Instead, several alternative theoretical concepts predict behavior that is much more in tune with observed data, with the quantal response equilibrium as the most prominent example. However, here we show that this equilibrium notion itself, like any other concept that varies smoothly with the payoffs, is necessarily subject to framing effects: If the same economic problem is represented in a different but equivalent way, the predicted results will differ. As a consequence, we argue that tools and methods that are successful in explaining human behavior in laboratory experiments may be unsuitable for doing theory.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- E. Kohlberg & J.-F. Mertens, 1998.
"On the Strategic Stability of Equilibria,"
Levine's Working Paper Archive
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- Gilboa, Itzhak & Matsui, Akihiko, 1991.
"Social Stability and Equilibrium,"
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- C. Monica Capra, 1999. "Anomalous Behavior in a Traveler's Dilemma?," American Economic Review, American Economic Association, vol. 89(3), pages 678-690, June.
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