Aumann, Schelling share Nobel economics prize

10th October 2005, Comments 0 comments

10 October 2005, STOCKHOLM - Robert Aumann and Thomas Schelling won the Nobel prize for economics Monday for helping explain how game theory contributes to understanding conflict and cooperation between countries and individuals.

10 October 2005

STOCKHOLM - Robert Aumann and Thomas Schelling won the Nobel prize for economics Monday for helping explain how game theory contributes to understanding conflict and cooperation between countries and individuals.

German-born Aumann, 75, is professor at the Centre for Rationality, Hebrew University of Jerusalem, Israel. He holds both Israeli and U.S. citizenship.

U.S. citizen Schelling, 84, is professor emiritus at the Department of Economics and School of Public Policy, University of Maryland, College Park, U.S.

Announcing the award, the Royal Swedish Academy of Sciences said game theory helps "our understanding of the prerequisites for cooperation".

"Insights into these issues help 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," the Academy said.

Aumann said he was "completely surprised and had "no clue" he was going to be awarded the prize. "However, I am naturally enormously pleased," he told Deutsche Presse-Agentur in Israel.

Aumann, 75, was born in Germany but fled the Nazis for the United States with his family in 1938. Since 1956 he has lived in Israel.

Game theory encompasses decisions that are made in an environment where various players interact strategically. It studies choice of optimal behaviour when costs and benefits of each option are not fixed, but depend upon the choices of other individuals.

The theory has applications in a variety of fields, including economics, international relations, evolutionary biology, political science and military strategy.

During the 1950s, Schelling began to apply game theory to global security and the arms race, suggesting that "the capability to retaliate can be more useful than the ability to resist an attack, and that uncertain retaliation is more credible and more efficient than certain retaliation."

He published results of his research 1960 in the influential study "The Strategy of Conflict," which has influenced many strategic thinkers, the Academy said.

Aumann and other researchers extended the findings, analyzing the difficulties that arise when there are many parties or when they interact infrequently, contributing to an explanation of economic conflicts such as price wars and trade wars.

This year's prize in memory of Alfred Nobel, known formally as the Bank of Sweden Prize in Economic Sciences, is worth 10 million kronor (1.3 million dollars).

No woman has to date been awarded the economics prize, which was first awarded in 1969.

Last week, the Nobel awards were announced for medicine, physics, chemistry, and peace. Yet to be announced is the literature prize.

The awards were endowed by Swedish industrialist Alfred Nobel, the inventor of dynamite. The prize ceremonies will be held on December 10, the anniversary of Nobel's death.

DPA

Subject: German news

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