 Behavioral game theory explanations of intuitive anomaliesCharles A. Holt Chapter 7 in The Origins and Evolution of Experimental Economics, 2026, pp 103-130 from Edward Elgar Publishing Abstract: Standard game theory is based on extreme assumptions: that beliefs exactly match choice probabilities; and that behavior adjusts sharply to small payoff differences. Important developments in behavioral game theory have relaxed both assumptions by introducing random “noise.” The resulting “quantal response equilibrium” models substitute smoothed “better responses” for sharp “best responses.” When the equilibrium is in mixed strategies, the analysis of Nash equilibrium effects of exogenous changes is like trying to use supply and demand when they are constrained to be vertical and horizontal lines. Unlike the biases considered in Chapter 6, the behavioral biases that arise in interactive games can have cascading effects with dramatic consequences. This chapter uses social dilemma, coordination, and attacker–defender games to demonstrate how game theory can be enriched to explain intuitive behavioral anomalies. The applications all have the feature that the Nash equilibrium does not explain the most salient feature of observed data. Keywords: Nash Equilibrium; Mixed-Strategy Equilibrium; Quantal Response Equilibrium; Attacker-Defender Games; Risk Aversion (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:elg:eechap:24325_7 Ordering information: This item can be ordered from Access Statistics for this chapter More chapters in Chapters from Edward Elgar Publishing |
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