M Equilibrium: A Theory of Beliefs and Choices in Games
American Economic Review
vol. 111,
no. 12, December 2021
(pp. 4002-45)
Abstract
We introduce a set-valued solution concept, M equilibrium, to capture empirical regularities from over half a century of game theory 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.Citation
Goeree, Jacob K., and Philippos Louis. 2021. "M Equilibrium: A Theory of Beliefs and Choices in Games." American Economic Review, 111 (12): 4002-45. DOI: 10.1257/aer.20201683Additional Materials
JEL Classification
- C72 Noncooperative Games
- C90 Design of Experiments: General
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness