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Endogeneous Quantal Response Equilibrium for Normal Form Games

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  • Oswaldo Gressani

    (CREA, Université de 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.

Suggested Citation

  • 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.
    • Handle: RePEc:luc:wpaper:15-18
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    References listed on IDEAS

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    Keywords

    Quantal Response Equilibrium; bounded rationality; learning;
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