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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 University College London in its series Open Access publications from University College London with number http://discovery.ucl.ac.uk/17306/.

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Date of creation: Apr 2004
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Publication status: Published in GAME ECON BEHAV (2004-04) v.47, p.200-220
Handle: RePEc:ner:ucllon:http://discovery.ucl.ac.uk/17306/

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1. Piccione, Michele, 1992. "Finite automata equilibria with discounting," Journal of Economic Theory, Elsevier, vol. 56(1), pages 180-193, February.
2. Piccione Michele & Rubinstein Ariel, 1993. "Finite Automata Play a Repeated Extensive Game," Journal of Economic Theory, Elsevier, vol. 61(1), pages 160-168, October.
3. Ehud Kalai & William Stanford, 1986. "Finite Rationality and Interpersonal Complexity in Repeated Games," Discussion Papers 679, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
   
   • Kalai, Ehud & Stanford, William, 1988. "Finite Rationality and Interpersonal Complexity in Repeated Games," Econometrica, Econometric Society, vol. 56(2), pages 397-410, March.
4. Banks, Jeffrey S. & Sundaram, Rangarajan K., 1990. "Repeated games, finite automata, and complexity," Games and Economic Behavior, Elsevier, vol. 2(2), pages 97-117, June.
   
   • 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).
5. Kalyan Chatterjee & Hamid Sabourian, 1998. "Multiperson Bargaining and Strategic Complexity," CRIEFF Discussion Papers 9808, Centre for Research into Industry, Enterprise, Finance and the Firm.
   
   • Kalyan Chatterjee & Hamid Sabourian, 2000. "Multiperson Bargaining and Strategic Complexity," Econometrica, Econometric Society, vol. 68(6), pages 1491-1510, November.
   • Chatterjee, K. & Sabourian, H., 1997. "Multiperson Bargaining and Strategic Complexity," Cambridge Working Papers in Economics 9733, Faculty of Economics, University of Cambridge.
6. 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.
   
   • Eliaz, K., 2001. "Nash Equilibrium When Players Account for the Complexity of their Forecasts," Papers 2001-6, Tel Aviv.
7. 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.
8. Ariel Rubinstein, 1997. "Finite automata play the repeated prisioners dilemma," Levine's Working Paper Archive 1639, David K. Levine.
   
   • Rubinstein, Ariel, 1986. "Finite automata play the repeated prisoner's dilemma," Journal of Economic Theory, Elsevier, vol. 39(1), pages 83-96, June.
9. 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.

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Cited by:

1. Friederike Mengel, 2007. "Learning Across Games," Working Papers. Serie AD 2007-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
   
   • Mengel, Friederike, 2012. "Learning across games," Games and Economic Behavior, Elsevier, vol. 74(2), pages 601-619.
2. Li, Duozhe, 2007. "Bargaining with history-dependent preferences," Journal of Economic Theory, Elsevier, vol. 136(1), pages 695-708, September.
3. Philippe Jeniel, 2001. "Analogy-Based Expectation Equilibrium," Economics Working Papers 0003, Institute for Advanced Study, School of Social Science.
   
   • Jehiel, Philippe, 2005. "Analogy-based expectation equilibrium," Journal of Economic Theory, Elsevier, vol. 123(2), pages 81-104, August.
   • Philippe Jehiel, 2005. "Analogy-Based Expectation Equilibrium," Levine's Bibliography 784828000000000106, UCLA Department of Economics.
4. Azrieli, Yaron, 2009. "Categorizing others in a large game," Games and Economic Behavior, Elsevier, vol. 67(2), pages 351-362, November.
5. Tsakas Elias, 2012. "Rational belief hierarchies," Research Memoranda 004, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization.
6. Sandroni, Alvaro & Cherepavov, Vadim & Feddersen, Timothy, 0. "Rationalization," Theoretical Economics, Econometric Society.
7. Azrieli, Yaron, 2007. "Thinking categorically about others: A conjectural equilibrium approach," MPRA Paper 3843, University Library of Munich, Germany.
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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