Israeli, American Share Economics Nobel Prize

Sun | Nation & World



The theory, which was devised in 1944 by John von Neumann and Oskar Morgenstern, is often used in a political or military context to explain conflicts between countries but has been of late used to map trends in the business world, ranging from how cartels set prices to how companies can better sell their goods and services in new markets.

"The understanding of game theory helps explain economic conflicts like price competition and trade wars," said Jorgen Weibull, chairman of the prize committee.

Aumann, 75, and Schelling, 84, who know each other but have never worked together, were cited by the Royal Swedish Academy of Sciences for helping explain "economic conflicts such as price wars and trade wars, as well as why some communities are more successful than others in managing common-pool resources."

It said the pair's work could be applied to understand how merchant guilds, international trade treaties and even organized crime groups are formed and operate.

This year's award also marked the sixth year running that Americans have won the prize.

The economics prize, worth $1.3 million, is the only one of the Nobel awards not established in the will of Swedish industrialist Alfred Nobel, the inventor of dynamite.

The medicine, physics, chemistry, literature and peace prizes were first awarded in 1901, while the economics prize was set up by the Swedish central bank in 1968.