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Quantal response equilibria for posted offer-markets

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  • Gladys López-Acevedo

    (Banco Mundial)

Abstract

There is a growing body of data from game theory and industrial organization experiments that reveals systematic deviations from Nash equilibrium behavior. In this paper, the perfectly rational decision making embodied in Bertrand Nash equilibrium is generalized to allow for endogenously determined decision errors. Closed form solutions for equilibrium price distributions with endogenous errors are derived for several different models. In some of these models, the price distribution in a quantal response equilibrium, QRE, is affected by changes in structural variables although the Nash equilibrium remains unaltered. The quantal response approach is appealing since it thereby accounts for systematic deviations from the Bertrand Nash equilibrium.

Suggested Citation

  • Gladys López-Acevedo, 1997. "Quantal response equilibria for posted offer-markets," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 12(2), pages 95-131.
    • Handle: RePEc:emx:esteco:v:12:y:1997:i:2:p:95-131
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    References listed on IDEAS

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    Cited by:

    1. Oswaldo Gressani, 2015. "Endogeneous Quantal Response Equilibrium for Normal Form Games," DEM Discussion Paper Series 15-18, Department of Economics at the University of Luxembourg.
    2. Blavatskyy, Pavlo, 2018. "Oligopolistic price competition with a continuous demand," Mathematical Social Sciences, Elsevier, vol. 93(C), pages 123-131.
    3. Ralph-C. Bayer & Hang Wu & Mickey Chan, 2014. "Special Section: Experiments on Learning, Methods, and Voting," Pacific Economic Review, Wiley Blackwell, vol. 19(3), pages 278-295, August.
    4. Michael R. Baye & John Morgan, 2004. "Price Dispersion in the Lab and on the Internet: Theory and Evidence," RAND Journal of Economics, The RAND Corporation, vol. 35(3), pages 448-466, Autumn.
    5. Martin Dufwenberg & Uri Gneezy & Jacob Goeree & Rosemarie Nagel, 2007. "Price floors and competition," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 33(1), pages 211-224, October.
    6. Gressani, O., 2015. "Endogeneous Quantal Response Equilibrium for Normal Form Games," LIDAM Discussion Papers CORE 2015053, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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