American Economic Review Vol. 111 No. 12 2021
M Equilibrium: A Theory of Beliefs and Choices in Games
Abstract
We introduce a set-valued solution concept, M equilibrium, to capture empirical regularities from over half a century of game-theory experiments. We show M equilibrium serves as a meta theory for various models that hitherto were considered unrelated. M equilibrium is empirically robust and, despite being set-valued, falsifiable. We report results from a series of experiments comparing M equilibrium to leading behavioral-game-theory models and demonstrate its virtues in predicting observed choices and stated beliefs. Data from experimental games with a unique pure-strategy Nash equilibrium and multiple M equilibria exhibit coordination problems that could not be anticipated through the lens of existing models.
- DOI
- 10.1257/aer.20201683
- Volume
- 111
- Issue
- 12
- Pages
- 4002-4045
- Language
- en
- Sources
- openalex bibtex:phds-export.bib crossref