  We propose a generalization of Quantal Response Equilibrium (QRE) built on a
simple premise: some actions are more focal than others. In our model, which we
call the Focal Quantal Response Equilibrium (Focal QRE), each player plays a
stochastic version of Nash equilibrium as in the QRE, but some strategies are
focal and thus are chosen relatively more frequently than other strategies
after accounting for expected utilities. The Focal QRE is able to systemically
account for various forms of bounded rationality of players, especially
regret-aversion, salience, or limited consideration. The Focal QRE is also
useful to explain observed heterogeneity of bounded rationality of players
across different games. We show that regret-based focal sets perform relatively
well at predicting strategies that are chosen more frequently relative to their
expected utilities.
