An empirical model of non-equilibrium behavior in games

This paper studies the identification and estimation of the decision rules that in- dividuals use to determine their actions in games, based on a structural econo- metric model of non-equilibrium behavior in games. The model is based pri- marily on various notions of limited strategic reasoning, allowing multiple modes of strategic reasoning and heterogeneity in strategic reasoning across individu- als and within individuals. The paper proposes the model and provides sufficient conditions for point identification of the model. Then the model is estimated on data from an experiment involving two-player guessing games. The application illustrates the empirical relevance of the main features of the model.