Simplicity of beliefs and delay tactics in a concession game

I explore the idea of simplicity as a belief-selection criterion in games. A pair of strategies in finite-automata representation (s1, s2) is a “Simple Nash Equilibrium” (SINE) if: (1) sj is a best-reply to si ; (2) every automaton for player j, which generates the same path as sj (given si), has at least as many states as sj . 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. ∗I am deeply grateful to the Institute for Advanced Study at Princeton for its stimulating hospitality. I also thank Eddie Dekel, Kfir Eliaz, Michele Piccione, Ariel Rubinstein, an associate editor and a referee for helpful comments.