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On the Empirical Content of Quantal Response Equilibrium

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Abstract:

The quantal response equilibrium (QRE) notion of Richard D. McKelvey and Thomas R. 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.

Document Type: Research Article

DOI: http://dx.doi.org/10.1257/aer.98.1.180

Publication date: March 1, 2008

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aea/aer/2008/00000098/00000001/art00007
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