2023/04/02 by Matthew Kovach, Kovach, Matthew, Gerelt Tserenjigmid +1
Decision Sciences · Social Sciences · #Decision-Making and Behavioral Economics #Experimental Behavioral Economics Studies #FOS: Economics and business #Game Theory and Applications #Theoretical Economics (econ.TH)
paper · pdf · doi:10.48550/arxiv.2304.00438
openalex publication_date 2023/04/02 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
We propose a generalization of Quantal Response Equilibrium (QRE) built on a simple premise: some actions are more focal than others. In our model, which we call the Focal Quantal Response Equilibrium (Focal QRE), each player plays a stochastic version of Nash equilibrium as in the QRE, but some strategies are focal and thus are chosen relatively more frequently than other strategies after accounting for expected utilities. The Focal QRE is able to systematically account for various forms of bounded rationality of players, especially regret-aversion, salience, or limited consideration. The Focal QRE is also useful for explaining the observed heterogeneity of bounded rationality of players across different games. We show that regret-based focal sets perform relatively well at predicting strategies that are chosen more frequently relative to their expected utilities.