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Simplicity of Beliefs and Delay Tactics in a Concession Game

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  • Ran Spiegler

Abstract

I explore the idea of simplicity as a belief-selection criterion in games. A pair of strategies in finite-automata representation (s(1), s(2)) is a Simple Nash Equilibrium (SINE) if: (1) s(j) is a best-reply to s(i); (2) every automaton for player j, which generates the same path as s(j) (given s(i)), has at least as many states as s(j). I apply SINE to a bilateral concession game and show that it captures an aspect of bargaining behavior: players employ delay tactics in order to justify their concessions. Delay tactics are mutually reinforcing, and this may prevent players from reaching an interior agreement. (C) 2003 Elsevier Inc. All rights reserved.

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Paper provided by David K. Levine in its series Levine's Working Paper Archive with number 506439000000000208.

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Date of creation: 27 Jan 2003
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Handle: RePEc:cla:levarc:506439000000000208

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  1. Banks, J.S. & Sundaram, R.K., 1989. "Repeated Games, Finite Automata, And Complexity," RCER Working Papers 183, University of Rochester - Center for Economic Research (RCER).
  2. Eliaz, Kfir, 2003. "Nash equilibrium when players account for the complexity of their forecasts," Games and Economic Behavior, Elsevier, vol. 44(2), pages 286-310, August.
  3. Abreu, Dilip & Rubinstein, Ariel, 1988. "The Structure of Nash Equilibrium in Repeated Games with Finite Automata," Econometrica, Econometric Society, vol. 56(6), pages 1259-81, November.
  4. Piccione, Michele, 1992. "Finite automata equilibria with discounting," Journal of Economic Theory, Elsevier, vol. 56(1), pages 180-193, February.
  5. Piccione Michele & Rubinstein Ariel, 1993. "Finite Automata Play a Repeated Extensive Game," Journal of Economic Theory, Elsevier, vol. 61(1), pages 160-168, October.
  6. Ariel Rubinstein, 1997. "Finite automata play the repeated prisioners dilemma," Levine's Working Paper Archive 1639, David K. Levine.
  7. Kalai, Ehud & Stanford, William, 1988. "Finite Rationality and Interpersonal Complexity in Repeated Games," Econometrica, Econometric Society, vol. 56(2), pages 397-410, March.
  8. Spiegler, Ran, 2002. "Equilibrium in Justifiable Strategies: A Model of Reason-Based Choice in Extensive-Form Games," Review of Economic Studies, Wiley Blackwell, vol. 69(3), pages 691-706, July.
  9. Kalyan Chatterjee & Hamid Sabourian, 2000. "Multiperson Bargaining and Strategic Complexity," Econometrica, Econometric Society, vol. 68(6), pages 1491-1510, November.
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Cited by:
  1. Jehiel, Philippe, 2005. "Analogy-based expectation equilibrium," Journal of Economic Theory, Elsevier, vol. 123(2), pages 81-104, August.
  2. Tsakas Elias, 2012. "Rational belief hierarchies," Research Memoranda 004, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization.
  3. Friederike Mengel, 2007. "Learning Across Games," Working Papers. Serie AD 2007-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  4. Li, Duozhe, 2007. "Bargaining with history-dependent preferences," Journal of Economic Theory, Elsevier, vol. 136(1), pages 695-708, September.
  5. Sandroni, Alvaro & Cherepavov, Vadim & Feddersen, Timothy, 0. "Rationalization," Theoretical Economics, Econometric Society.
  6. Azrieli, Yaron, 2007. "Thinking categorically about others: A conjectural equilibrium approach," MPRA Paper 3843, University Library of Munich, Germany.
  7. Azrieli, Yaron, 2009. "Categorizing others in a large game," Games and Economic Behavior, Elsevier, vol. 67(2), pages 351-362, November.
  8. Maenner, Eliot, 2008. "Adaptation and complexity in repeated games," Games and Economic Behavior, Elsevier, vol. 63(1), pages 166-187, May.

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