American Economic Review: Vol. 98 No. 1 (March 2008)

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On the Empirical Content of Quantal Response Equilibrium

Article Citation

Haile, Philip A., Ali Hortaçsu, and Grigory Kosenok. 2008. "On the Empirical Content of Quantal Response Equilibrium." American Economic Review, 98(1): 180-200.

DOI: 10.1257/aer.98.1.180

Abstract

The quantal response equilibrium (QRE) notion of Richard D. McKelvey and Thomas R. 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. (JEL C72, D84)

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Authors

Haile, Philip A. (Yale U)
Hortaçsu, Ali (U Chicago)
Kosenok, Grigory (New Economic School, Moscow)

JEL Classifications

C72: Noncooperative Games
D84: Expectations; Speculations


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