Scandinavian Working Papers in Economics
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The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Economics and Finance

No 542:
Probabilistic choice in games: properties of Rosenthal's t-solutions

Mark Voorneveld ()

Abstract: In t-solutions, quantal response equilibria based on the linear probability model as introduced in R.W. Rosenthal (1989, Int. J. Game Theory 18, 273-292), choice probabilities are related to the determination of leveling taxes. The set of t-solutions coincides with the set of Nash equilibria of a game with quadratic control costs. Increasing the rationality of the players allows them to successively eliminate higher levels of strictly dominated actions. Moreover, there exists a path of t-solutions linking uniform randomization to Nash equilibrium.

Keywords: quantal response equilibrium; t-solutions; linear probability model; (follow links to similar papers)

JEL-Codes: C72; (follow links to similar papers)

15 pages, October 28, 2003, Revised December 20, 2003

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