In simultaneous equations models, dependent variables are functions of other dependent variables. Thus some of the explanatory variables are jointly determined with the dependent variable. For instance, in the simple model of supply and demand, price and quantity are jointly determined.

Simultaneous equations models are a type of statistical model in which the dependent variables are functions of other dependent variables, rather than just independent variables. This means some of the explanatory variables are jointly determined with the dependent variable, which in economics usually is the consequence of some underlying equilibrium mechanism. For instance, in the simple model of supply and demand, price and quantity are jointly determined.

Simultaneity poses challenges for the estimation of the statistical parameters of interest, because the Gauss–Markov assumption of strict exogeneity of the regressors is violated. This can be dealt with by techniques that estimate each equation in the model seriatim, most notably limited information maximum likelihood and two-stage least squares. A less popular alternative is system-wide estimation like full information maximum likelhood and three-stage least squares.

Based on Wikipedia article on simultaneous equation model.