M Equilibrium: A Theory of Beliefs and Choices in Games
Jacob K. Goeree
- American Economic Review (Forthcoming)
We introduce a set-valued solution concept, M equilibrium, to
capture empirical regularities from over half a century of gametheory
experiments. We show M equilibrium serves as a meta
theory for various models that hitherto were considered unrelated.
M equilibrium is empirically robust and, despite being set-valued,
falsifiable. Results from a series of experiments that compare M
equilibrium to leading behavioral-game-theory models demonstrate
its virtues in predicting observed choices and stated beliefs. Data
from experimental games with a unique pure-strategy Nash equilibrium
and multiple M equilibria exhibit coordination problems that
could not be anticipated through the lens of existing models.
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