Title

On the Empirical Content of Quantal Response Equilibrium

Document Type

Discussion Paper

Publication Date

8-1-2003

CFDP Number

1432R

CFDP Revision Date

2006-08-01

CFDP 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.

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