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On the Empirical Content of Quantal Response Equilibrium

Author

Listed:
  • Philip A. Haile

    (Yale University, Faculty of Arts & Sciences, Department of Economics (Box 8264))

  • Ali Hortacsu

    (University of Chicago, Department of Economics)

  • Grigory Kosenok

    (New Economic School)

Abstract

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.

Suggested Citation

  • Philip A. Haile & Ali Hortacsu & Grigory Kosenok, 2004. "On the Empirical Content of Quantal Response Equilibrium," Yale School of Management Working Papers ysm421, Yale School of Management.
    • Handle: RePEc:ysm:somwrk:ysm421
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    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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