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Sequential equilibrium in monotone games: a theory-based analysis of experimental data

Choi, S.; Gale, D.; Kariv, S.; (2008) Sequential equilibrium in monotone games: a theory-based analysis of experimental data. Journal of Economic Theory , 143 (1) pp. 302-330. 10.1016/j.jet.2008.03.001. Green open access

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Abstract

A monotone game is an extensive-form game with complete information, simultaneous moves and an irreversibility structure on strategies. It captures a variety of situations in which players make partial commitments and allows us to characterize conditions under which equilibria result in socially desirable outcomes. However, since the game has many equilibrium outcomes, the theory lacks predictive power. To produce stronger predictions, one can restrict attention to the set of sequential equilibria, or Markov equilibria, or symmetric equilibria, or pure-strategy equilibria. This paper explores the relationship between equilibrium behavior in a class of monotone games, namely voluntary contribution games, and the behavior of human subjects in an experimental setting. Several key features of the symmetric Markov perfect equilibrium (SMPE) are consistent with the data. To judge how well the SMPE fits the data, we estimate a model of Quantal Response Equilibrium (QRE) [R. McKelvey, T. Palfrey, Quantal response equilibria for normal form games, Games Econ. Behav. 10 (1995) 6–38; R. McKelvey, T. Palfrey, Quantal response equilibria for extensive form games, Exp. Econ. 1 (1998) 9–41] and find that the decision rules of the QRE model are qualitatively very similar to the empirical choice probabilities.

Type: Article
Title: Sequential equilibrium in monotone games: a theory-based analysis of experimental data
Open access status: An open access version is available from UCL Discovery
DOI: 10.1016/j.jet.2008.03.001
Publisher version: http://dx.doi.org/10.1016/j.jet.2008.03.001
Language: English
Additional information: The original publication is available at www.springerlink.com. Please see http://eprints.ucl.ac.uk/14464/ for another version of this article
Keywords: Experiment, monotone games, refinements, pure strategy, mixed strategy, Markov perfect, quantal response equilibrium
UCL classification: UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of SandHS > Dept of Economics
URI: http://discovery.ucl.ac.uk/id/eprint/12657
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