Random belief equilibrium in normal form games |
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Authors: | James W Friedman Claudio Mezzetti |
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Institution: | Department of Economics, CB #3305, University of North Carolina, Chapel Hill, NC 27599-3305, USA |
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Abstract: | In defining random belief equilibrium (RBE) in finite, normal form games we assume a player's beliefs about others' strategy choices are randomly drawn from a belief distribution that is dispersed around a central strategy profile, the focus. At an RBE: (1) Each chooses a best response relative to her beliefs. (2) Each player's expected choice coincides with the focus of the other players' belief distributions. RBE provides a statistical framework for estimation which we apply to data from three experimental games. We also characterize the limit-RBE as players' beliefs converge to certainty. When atoms in the belief distributions vanish in the limit, not all limit-RBE (called robust equilibria) are trembling hand perfect Nash equilibria and not all perfect equilibria are robust. |
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Keywords: | Random belief equilibrium Quantal response equilibrium Nash equilibrium Normal form games strategic form games |
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