Home » Eng Finance » S » Subgame perfect equilibrium

Subgame perfect equilibrium

A refinement of Nash equilibrium used in sequential games. A subgame perfect equilibrium is a set of strategies (one for each of the players) with the property that the strategies constitute a Nash equilibrium for every subgame of the original game. A subgame perfect equilibrium is usually found using backward induction.

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