QUANTAL RESPONSE EQUILIBRIA FOR NORMAL-FORM GAMES

We investigate the use of standard statistical models for quantal choice in a game theoretic setting. Players choose strategies based on relative expected utility and assume other players do so as well. We define a quantal response equilibrium (QRE) as a fixed point of this process and establish existence. For a logit specification of the error structure, we show that as the error goes to zero, QRE approaches a subset of Nash equilibria and also implies a unique selection from the set of Nash equilibria in generic games. We fit the model to a variety of experimental data sets by using maximum likelihood estimation. (C) 1995 Academic Press, Inc.