M Equilibrium: A Theory of Beliefs and Choices in Games
Jacob K. Goeree, Philippos Louis
American Economic Review · 2021 · Volume 111 · Issue 12
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. Results from a series of experiments that compare M equilibrium to leading behavioral game theory models 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.
Keywords
Noncooperative Games, Design of Experiments: General, Search, Learning, Information and Knowledge, Communication, Belief, Unawareness
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