Non-parametric identification and testing of quantal response equilibrium / by Johannes Hoelzemann, Ryan Webb and Erhao Xie.: FB3-5/2024-24E-PDF
"We study the falsifiability and identification of Quantal Response Equilibrium (QRE) when each player's utility and error distribution are relaxed to be unknown non-parametric functions. Using variations of players' choices across a series of games, we first show that both the utility function and the distribution of errors are non-parametrically over-identified. This result further suggests a straightforward testing procedure for QRE that achieves the desired type-1 error and maintains a small type-2 error. To apply this methodology, we conduct an experimental study of the matching pennies game. Our non-parametric estimates strongly reject the conventional logit choice probability. Moreover, when the utility and the error distribution are sufficiently flexible and heterogeneous, the quantal response hypothesis cannot be rejected for 70% of participants. However, strong assumptions such as risk neutrality, logistically distributed errors and homogeneity lead to substantially higher rejection rates"--Abstract, page ii.
Permanent link to this Catalogue record:
publications.gc.ca/pub?id=9.942580&sl=0
| Department/Agency | Bank of Canada, issuing body. |
|---|---|
| Title | Non-parametric identification and testing of quantal response equilibrium / by Johannes Hoelzemann, Ryan Webb and Erhao Xie. |
| Series title | Staff working paper = Document de travail du personnel, 1701-9397 ; 2024-24 |
| Publication type | Series - View Master Record |
| Language | [English] |
| Format | Electronic |
| Electronic document | |
| Note(s) | ISSN assigned to different series. "Last updated: June 17, 2024." Includes bibliographical references (pages 46-48). Includes abstracts in English and French. |
| Publishing information | [Ottawa] : Bank of Canada = Banque du Canada, 2024. ©2024 |
| Author / Contributor | Hoelzemann, Johannes, author. |
| Description | 1 online resource (ii, 48, 4, 6, 5, 12, 14 pages) : illustrations (chiefly colour). |
| Catalogue number |
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| Subject terms | Equilibrium (Economics) -- Econometric models. Game theory -- Econometric models. Équilibre (Économie politique) -- Modèles économétriques. Théorie des jeux -- Modèles économétriques. |
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