The Focal Quantal Response Equilibrium
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arXiv
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| Main Authors: | , |
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| Format: | Preprint |
| Published: |
2023
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| _version_ | 1866910248940339200 |
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| author | Kovach, Matthew Tserenjigmid, Gerelt |
| author_facet | Kovach, Matthew Tserenjigmid, Gerelt |
| contents | We propose a generalization of Quantal Response Equilibrium (QRE) built on a simple premise: some actions are more focal than others. In our model, which we call the Focal Quantal Response Equilibrium (Focal QRE), each player plays a stochastic version of Nash equilibrium as in the QRE, but some strategies are focal and thus are chosen relatively more frequently than other strategies after accounting for expected utilities. The Focal QRE is able to systematically account for various forms of bounded rationality of players, especially regret-aversion, salience, or limited consideration. The Focal QRE is also useful for explaining the observed heterogeneity of bounded rationality of players across different games. We show that regret-based focal sets perform relatively well at predicting strategies that are chosen more frequently relative to their expected utilities. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2304_00438 |
| institution | arXiv |
| publishDate | 2023 |
| record_format | arxiv |
| spellingShingle | The Focal Quantal Response Equilibrium Kovach, Matthew Tserenjigmid, Gerelt Theoretical Economics We propose a generalization of Quantal Response Equilibrium (QRE) built on a simple premise: some actions are more focal than others. In our model, which we call the Focal Quantal Response Equilibrium (Focal QRE), each player plays a stochastic version of Nash equilibrium as in the QRE, but some strategies are focal and thus are chosen relatively more frequently than other strategies after accounting for expected utilities. The Focal QRE is able to systematically account for various forms of bounded rationality of players, especially regret-aversion, salience, or limited consideration. The Focal QRE is also useful for explaining the observed heterogeneity of bounded rationality of players across different games. We show that regret-based focal sets perform relatively well at predicting strategies that are chosen more frequently relative to their expected utilities. |
| title | The Focal Quantal Response Equilibrium |
| topic | Theoretical Economics |
| url | https://arxiv.org/abs/2304.00438 |