On the Empirical Content of Quantal Response Equilibrium
Philip A. Haile
Yale University - Department of Economics; National Bureau of Economic Research (NBER)
University of Chicago - Department of Economics; National Bureau of Economic Research (NBER)
New Economic School
Cowles Foundation Discussion Paper No. 1432R
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.
Number of Pages in PDF File: 27
Keywords: Quantal response equilibrium, Falsifiability, Testable restrictions, Regular quantal response equilibrium, Rank-cumulative probabilities, Block-Marschak polynomials
JEL Classification: C7, C9working papers series
Date posted: August 28, 2006
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