Open-loop model

For other uses of "Open-loop", see Open-loop (disambiguation).

In game theory, an open-loop model is the one where players cannot observe the play of their opponents, as opposed to a closed-loop model, where all past play is common knowledge. The solution to an open-loop model is called "open-loop equilibrium".

Open loop models are more tractable, which is why they are sometimes preferred to closed-loop models even when the latter is a better description of reality.

References

• Fudenberg, Drew and Levine, David K.: Open-Loop and Closed-Loop Equilibria in Dynamic Games with Many players, Journal of Economic Theory 44, 1988.