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Quantal Response EquilibriumA Stochastic Theory of Games$
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Jacob K. Goeree, Charles A. Holt, and Thomas R. Palfrey

Print publication date: 2016

Print ISBN-13: 9780691124230

Published to Princeton Scholarship Online: January 2018

DOI: 10.23943/princeton/9780691124230.001.0001

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Applications to Game Theory

Applications to Game Theory

(p.161) 7 Applications to Game Theory
Quantal Response Equilibrium

Jacob K. Goeree

Charles A. Holt

Thomas R. Palfrey

Princeton University Press

This chapter explores several applications of quantal response equilibrium (QRE) to specific games in order to illustrate and expand on the wide range of game-theoretic principles and phenomena associated with QRE that have been highlighted in the previous chapters. The first application considered belongs to the class of continuous games. With a continuum of decisions, QRE predicts a choice distribution that is not merely a (possibly asymmetric) spread to each side of a Nash equilibrium, since “feedback effects” from deviations by one player alter others' expected payoff profiles, which would induce further changes. The second application is a symmetric game with binary actions where players have continuously distributed private information about an unknown state of the world that affects both players' payoffs. The remainder of the chapter looks at three applications to extensive-form games, all of which are games of incomplete information.

Keywords:   quantal response equilibrium, QRE, games, game theory, symmetric game, extensive-form games, choice distribution

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