CFDP 1432R

On the Empirical Content of Quantal Response Equilibrium

Author(s): 

Publication Date: August 2003

Revision Date: August 2006

Pages: 26

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

JEL Classification Codes: C7, C9

See CFP: 1227