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US, Israeli economists win Nobel for “game theory”

October 10, 2005

STOCKHOLM (Reuters) – Israel’s Robert Aumann and American
Thomas Schelling won the 2005 Nobel economics prize on Monday
for their “game-theory analysis,” which can help resolve
conflicts in trade and business — and even avoid war.

Their studies have found uses in “security and disarmament
policies, price formation on markets, as well as economic and
political negotiations,” said the Royal Swedish Academy of
Sciences awarding the 10 million crown prize.

Aumann, 75, was born in Germany but is an Israeli and U.S.
citizen who teaches at the Hebrew University of Jerusalem.
Schelling, 84, teaches at the University of Maryland.

“Game theory” is a science of strategy, which attempts to
determine what actions different “players” — be they trading
partners, employers and unions or even crime syndicates —
should take to secure the best outcome for themselves.

Schelling has been applying it to global security and the
arms race since the 1950s while Aumann has conducted analysis
of “infinitely repeated games” to identify what outcomes can be
maintained over time.

“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,” said the Academy citation.




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