Equilibria in Logit Models of Social Interaction and Quantal Response Equilibrium

John K. Dagsvik ()
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John K. Dagsvik: Department of Health Management and Health Economics, Postal: HERO / Department of Health Management and Health Economics, P.O. Box 1089 Blindern, NO-0317 Oslo, Norway

No 2020:5, HERO Online Working Paper Series from University of Oslo, Health Economics Research Programme

Abstract: The Quantal Response Equilibrium (QRE) extends the notion of Nash equilibrium in game theory to a corresponding stochastic equilibrium model. In QRE models, perfectly rational expectations equilibrium embodied in mixed strategy Nash equilibrium is replaced by an imperfect, or noisy, rational expectations equilibrium. An important subclass of QRE is the logit models of social interaction. It is known that at least one equilibrium exists in QRE models, but it is not known if, and when, there exist several equilibria. In this paper we discuss cases when unique- or several equilibria exist in two-persons multinomial logit QRE models. Second, we consider the equilibria in multinomial models with social interaction. Third, we discuss corresponding dynamic games and stability. Finally, we consider several examples.

Keywords: Stochastic game theory; Logit QRE; Logit models with social interaction; Multiple equilibria (search for similar items in EconPapers)
JEL-codes: C02 C25 C62 C72 C73 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2020-10-06, Revised 2023-03-09
New Economics Papers: this item is included in nep-gth, nep-ore and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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