Economic Theory Bulletin

, Volume 3, Issue 1, pp 79–90

Quantal response equilibrium in a double auction

Research Article

DOI: 10.1007/s40505-014-0038-4

Cite this article as:
Neri, C. Econ Theory Bull (2015) 3: 79. doi:10.1007/s40505-014-0038-4

Abstract

This paper establishes existence and uniqueness of Quantal Response Equilibrium (QRE) in a double auction. The concept of QRE has the intuitive property that a deviation from best response is less likely the higher the cost associated with the deviation itself. Thanks to such property, the QRE accommodates stochastic elements in the analysis of the strategic decision-making that arises in the double auction. By providing a theoretical alternative to the Bayesian Nash Equilibrium model, the QRE model offers an appealing tool for analyzing data of double auction experiments.

Keywords

Quantal response equilibriumExistence of equilibriumAuctions

JEL Classification 

C62C72D44D82

Copyright information

© SAET 2014

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of St.GallenSt.GallenSwitzerland