The financial encyclopedia uses cookies to improve your user experience. Find out more here!



Open-loop equilibrium


An equilibrium of a multi-stage game in which players do not observe the strategy choices of opponents at previous decision nodes. In an open-loop equilibrium, the information structure prevents strategies evolving as the game is played. Instead, the game can be modelled by letting the players choose their strategies at the start of the game and permitting no revision of the strategies. In policy games, this is often referred to as the case of commitment. It should be contrasted with a closed-loop equilibrium which occurs when the past choices of other players are common knowledge.


Reference: Oxford Press Dictonary of Economics, 5th edt.