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On the Empirical Content of Quantal Response Equilibrium

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Abstract

The quantal response equilibrium (QRE) notion of McKelvey and Palfrey (1995) has recently attracted considerable attention, due in part to its widely documented ability to rationalize observed behavior in games played by experimental subjects. However, even with strong a priori restrictions on unobservables, QRE imposes no falsifiable restrictions: it can rationalize any distribution of behavior in any normal form game. After demonstrating this, we discuss several approaches to testing QRE under additional maintained assumptions.

Suggested Citation

  • Philip A. Haile & Ali Hortacsu & Grigory Kosenok, 0820. "On the Empirical Content of Quantal Response Equilibrium," Cowles Foundation Discussion Papers 1432R, Cowles Foundation for Research in Economics, Yale University, revised Jun 0820.
  • Handle: RePEc:cwl:cwldpp:1432r
    Note: CFP 1227.
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    Keywords

    Quantal response equilibrium; Falsifiability; Testable restrictions; Regular quantal response equilibrium; Rank-cumulative probabilities; Block-Marschak polynomials;

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • C9 - Mathematical and Quantitative Methods - - Design of Experiments

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