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TESTING THE QUANTAL RESPONSE HYPOTHESIS
Author(s) -
Melo Emerson,
Pogorelskiy Kirill,
Shum Matthew
Publication year - 2019
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12344
Subject(s) - consistency (knowledge bases) , monotonic function , nonparametric statistics , matching (statistics) , mathematics , regular polygon , function (biology) , mathematical economics , characterization (materials science) , econometrics , statistics , mathematical analysis , physics , discrete mathematics , geometry , evolutionary biology , optics , biology
We develop a nonparametric test for consistency of player behavior with the quantal response equilibrium (QRE). The test exploits a characterization of the equilibrium choice probabilities in any structural QRE as the gradient of a convex function; thereby, QRE‐consistent choices satisfy the cyclic monotonicity inequalities. Our testing procedure utilizes recent econometric results for moment inequality models. We assess our test using lab experimental data from a series of generalized matching pennies games. We reject the QRE hypothesis in the pooled data but cannot reject individual‐level quantal response behavior for over half of the subjects.