Endogeneous Quantal Response Equilibrium for Normal Form Games

Oswaldo Gressani ()
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Oswaldo Gressani: CREA, Université de Luxembourg

DEM Discussion Paper Series from Department of Economics at the University of Luxembourg

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 consistent estimate of his rival's rationality index and is able to choose his own rationality level according to a cost-benefit tradeoff 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
New Economics Papers: this item is included in nep-gth and nep-mic
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