On the Empirical Content of Quantal Response Equilibrium

Philip A. Haile, Ali Hortaçsu and Grigory Kosenok

No 1432R, Cowles Foundation Discussion Papers from Cowles Foundation, Yale University

Abstract: 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.

Keywords: Quantal response equilibrium; Falsifiability; Testable restrictions; Regular quantal response equilibrium; Rank-cumulative probabilities; Block-Marschak polynomials (search for similar items in EconPapers)
JEL-codes: C7 C9 (search for similar items in EconPapers)
Date: Written
Note: CFP 1227.
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Published in American Economic Review (2008), 98(1): 180-200

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http://cowles.econ.yale.edu/P/cd/d14a/d1432-r.pdf (application/pdf)

Related works:
Working Paper: On the Empirical Content of Quantal Response Equilibrium (2006)
Working Paper: On the Empirical Content of Quantal Response Equilibrium (2003)
Working Paper: On the Empirical Content of Quantal Response Equilibrium (2003)
Working Paper: On the Empirical Content of Quantal Response Equilibrium (2004)
Journal Article: On the Empirical Content of Quantal Response Equilibrium (2008)
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