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Strategic market games quantal response equilibria

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  • Dimitrios Voliotis

Abstract

The paper explores a model of boundedly rational traders who act strategically. The general framework of analysis is the sell all model of Shapley and Shubik [6] whereas the behavioral rule of traders is related to the bounded rationality of McKelvey and Palfrey [5] and the subsequent of Chen Friedman and Thisse [1]. A new equilibrium concept is introduced appropriate to integrate in the basic model market participants that may choose an inferior action with positive probability. Further, assuming that these market participants are engaged in an infinite repeated game and making them able to learn playing rationally, we demonstrate that in the limit the original equilibrium of Shapley and Shubik is attained and basically emerges as a special case of our equilibrium concept. Copyright Springer-Verlag Berlin/Heidelberg 2006

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  • Dimitrios Voliotis, 2006. "Strategic market games quantal response equilibria," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 27(2), pages 475-482, January.
    • Handle: RePEc:spr:joecth:v:27:y:2006:i:2:p:475-482
    DOI: 10.1007/s00199-004-0594-1
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    Cited by:

    1. Leonidas C. Koutsougeras & Claudia Meo, 2018. "An asymptotic analysis of strategic behavior for exchange economies," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 66(2), pages 301-325, August.
    2. Yves Breitmoser & Jonathan Tan & Daniel Zizzo, 2010. "Understanding perpetual R&D races," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 44(3), pages 445-467, September.

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