A quantal response equilibrium model of order-statistic games

This paper applies McKelvey and Palfrey's [Games Econ. Behav. 10 (1995) 6] notion of "quantal response equilibrium" to a class of "order-statistic" coordination games closely related to those studied by Van Huyck et al. [Am. Econ. Rev. 80 (1990) 234; Quart. J. Econ. 106 (1991) 885] and Van Huyck et al. [Evidence on Learning in Coordination Games. Manuscript, Texas A&M University, 1996] and those recently analyzed by Anderson et al. [Games Econ. Behav. 34 (2001) 177]. With quadratic effort costs, the limiting QRE as the noise goes to zero in their games is the most efficient equilibrium. This result contrasts with Anderson et al.'s conclusion for order-statistic games with linear effort costs, and allows a fuller assessment of the QRE's success in describing the limiting outcomes in Van Huyck et al.'s experiments. (C) 2002 Elsevier Science B.V. All rights reserved.