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On the Empirical Content of Quantal Response Equilibrium

The quantal response equilibrium (QRE) notion of McKelvey and Palfrey (1995) has recently attracted considerable attention, due largely to its widely documented ability to rationalize observed behavior in games played by experimental subjects. We show that this ability to fit the data, as typically measured in this literature, is uninformative. Without a priori distributional assumptions, a QRE can match any distribution of behavior by each player in any normal form game. We discuss approaches that might be taken to provide valid empirical evaluation of the QRE and discuss its potential value as an approximating empirical structure.

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File URL: http://cowles.econ.yale.edu/P/cd/d14a/d1432.pdf
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Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1432.

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Length: 22 pages
Date of creation: Aug 2003
Date of revision:
Publication status: Published in American Economic Review (2008), 98(1): 180-200
Handle: RePEc:cwl:cwldpp:1432
Contact details of provider: Postal: Yale University, Box 208281, New Haven, CT 06520-8281 USA
Phone: (203) 432-3702
Fax: (203) 432-6167
Web page: http://cowles.econ.yale.edu/

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