The Effects of Payoff Magnitude and Heterogeneity on Behavior in 2x2 Games with Unique Mixed Strategy Equilibria
The Logit version of Quantal Response Equilibrium (QRE) predicts that equilibrium behavior in games will vary systematically with payoff magnitudes, if all other factors are held constant (including the Nash equilibria of the game). We explore this in the context of a set of asymmetric 2 x 2 games with unique totally mixed strategy equilibria. The data provide little support for the payoff magnitude predictions of the Logit Equilibrium model. We extend the theoretical QRE model to allow for heterogeneity, and find that the data fit the heterogeneous version of the theory significantly better.
© 2000 Elsevier. Received 5 January 1998; received in revised form 27 January 1999; accepted 19 February 1999. We thank Heather Crawford and Pete Coughlan for help in running some of the experiments, and Eugene Grayver for writing the computer program for the experiments. Two referees provided helpful suggestions that improved the manuscript. The financial support of the National Science Foundation (Grant #SBR-9223701) is gratefully acknowledged.