The day after meeting Jerry in the restaurant (spoilers)

Why was Mike so slow to react to Jerry's actions over the stolen watch?

Mike trusted Jerry right up to when Jerry went to make a phone call. Why would Mike stay at the table for what must have been at least 2 hours? He'd have least have got up to see whether Jerry was still around. As soon as he realised Jerry had walked out, that's when he should have been aware that Jerry was going to stiff him.

The cop had promised his boss an explanation by the following day. So, at that point, Mike and the cop should have gone in together and explained their side of the story. They may not have had proof, but that shouldnt have stopped them saying what had happened. This was well before any hint of blackmail, etc. And, for what it's worth, Mike's wife had seen the watch too, and there was no reason for Mike to think that she wouldnt back him up.

Instead, straight after the restaurant, Mike seemed to get side-tracked by the fact that his wife had gone to a loan shark, and the theft of his idea for 3 marbles. He forgot his friend for at least a few days while all that went on.