Quantal response equilibrium

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Published on June 10, 2023 6:16:15 AM ● Video Link: https://www.youtube.com/watch?v=BV7hYg1Ac7w

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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.

Source: https://en.wikipedia.org/wiki/Quantal_response_equilibrium
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