COWLES FOUNDATION FOR RESEARCH IN
ECONOMICS Box 208281
COWLES FOUNDATION DISCUSSION PAPER NO. 1432R On the Empirical Content of Quantal Response Equilibrium Philip A. Haile, Ali Hortacsu and Grigory Kosenok Revised August 2006 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. JEL Classification: C7, C9 Keywords: Quantal response equilibrium, Falsifiability, Testable restrictions, Regular quantal response equilibrium, Rank-cumulative probabilities, Block-Marschak polynomials |
