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Posted on Oct 15, 10:03PM | IANS
American economists Alvin E. Roth and Lloyd S. Shapley Monday shared the 2012 Nobel Prize for Economics, which they won "for the theory of stable allocations and the practice of market design".
The award was announced by Staffan Normark, permanent secretary of the Royal Swedish Academy of Sciences in Stockholm.
"This year's prize is awarded for an outstanding example of economic engineering," Xinhua quoted the academy as saying in a statement.
The two researchers worked independently, but their empirical investigations, experiments and practical design have generated a flourishing field of research and improved the performance of many markets, the academy said.
Roth and Shapley tackled a central economic problem -- how to match different agents as well as possible.
"The prize rewards the two scholars who have answered these questions on a journey from abstract theory on stable allocations to practical design of market institutions," the academy said.
It was Roth who recognised that Shapley's theoretical results could clarify the functioning of important markets in practice.
Through a series of empirical studies, Roth and his colleagues showed that stability is the key to understanding the success of particular market institutions. Roth also substantiated the conclusion in systematic laboratory experiments.
Later, he also helped redesign existing institutions for matching new doctors with hospitals, students with schools and organ donors with patients.
"These reforms are all based on the Gale-Shapley algorithm, along with modifications that take into account specific circumstances and ethical restrictions, such as the preclusion of side payments," the Nobel Committee said in the statement.
Born in 1951 in the US, Roth got his Ph.D in 1974 from Stanford University and is George Gund Professor of Economics and Business Administration at Harvard University and Harvard Business School.
Shapley was born in 1923 and got his Ph.D in 1953 from Princeton University. He is Professor Emeritus at University of California.
The two laureates will equally share the eight million Swedish kronor (about USD 1 million) prize.
The economics award, established in 1968, is officially called The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. It was not part of the original crop of Nobel Prizes set out in Alfred Nobel's 1895 will.
Sixty-nine laureates have been awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel between 1901 and 2011.
All the Nobel prizes will be presented Dec 10, the day Alfred Nobel died.