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Stochastic Equilibria: Noise in Actions or Beliefs?

Friedman, Evan (2022) 'Stochastic Equilibria: Noise in Actions or Beliefs?' American Economic Journal: Microeconomics, 14 (1). pp. 94-142. ISSN 1945-7669

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We introduce noisy belief equilibrium (NBE) for normal-form games in which players best respond to noisy belief realizations. Axioms restrict belief distributions to be unbiased with respect to and responsive to changes in the opponents’ behavior. The axioms impose testable restrictions both within and across games, and we compare these restrictions to those of regular quantal response equilibrium (QRE) in which axioms are placed on the quantal response function as the primitive. NBE can generate similar predictions as QRE in several classes of games. Unlike QRE, NBE is a refinement of rationalizability and invariant to affine transformations of payoffs.

Item Type: Article
Additional Information: Data available at
Divisions: Faculty of Social Sciences > Economics, Department of
SWORD Depositor: Elements
Depositing User: Elements
Date Deposited: 31 Mar 2022 15:07
Last Modified: 31 Mar 2022 15:07

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