| Michael R. Baye, Indiana University John Morgan, Princeton University |
| Bounded Rationality in Homogeneous Product Pricing Games |
| Session: C-1-18 Friday 11 August 2000 by Morgan, John |
| This paper applies two notions of bounded rationality to homogeneous product pricing games -- Radner's (1980) epsilon equilibrium and McKelvey and Palfrey's (1995) quantal response equilibrium. A variety of statistical tests, based on two different experimental data sets and structural estimates of the parameters of epsilon equilibrium and quantal response equilibrium, indicate that these theories organize the data significantly better than the Nash prediction. |