Endogeneous Quantal Response Equilibrium for Normal Form Games

O. Gressani ()
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O. Gressani: Université catholique de Louvain, CORE, Belgium

No 2015053, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: We develop an equilibrium concept coined Endogeneous Quantal Response Equilibrium (EQRE) based on heterogeneous players and endogeneous learning in a logistic quantal choice model. Each player has an asymptotically con- sistent estimate of his rival’s rationality index and is able to choose his own rationality level according to a cost-benefit tradeo. This approach allows to enrich bounded rationality models by incorporating heterogeneous skills and by bridging the gap between stylized facts on the rationality index dynamics and a learning dimension.

Keywords: Quantal Response Equilibrium; bounded rationality; learning (search for similar items in EconPapers)
Date: 2015-11-01
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