Quantal response equilibrium (QRE) is a solution concept in game theory. First introduced by Richard McKelvey and Thomas Palfrey, it provides an equilibrium notion with bounded rationality. QRE is not an equilibrium refinement, and it can give significantly different results from Nash equilibrium. QRE is only defined for games with discrete strategies, although there are continuous-strategy analogues.
In a quantal response equilibrium, players are assumed to make errors in choosing which pure strategy to play. The probability of any particular strategy being chosen is positively related to the payoff from that strategy. In other words, very costly errors are unlikely.
The equilibrium arises from the realization of beliefs. A player's payoffs are computed based on beliefs about other players' probability distribution over strategies. In equilibrium, a player's beliefs are correct.
Read more about Quantal Response Equilibrium: Application To Data, Logit Equilibrium, For Dynamic Games
Famous quotes containing the words response and/or equilibrium:
“What I’m saying is that a lot of behavior that you are talking about is a direct response of people not having a future, or feeling that they don’t have a future.”
—William Julius Wilson (b. 1935)
“There is a relation between the hours of our life and the centuries of time. As the air I breathe is drawn from the great repositories of nature, as the light on my book is yielded by a star a hundred millions of miles distant, as the poise of my body depends on the equilibrium of centrifugal and centripetal forces, so the hours should be instructed by the ages and the ages explained by the hours.”
—Ralph Waldo Emerson (1803–1882)