Aumann and Schelling Awarded Nobel Economics Prize

"Aumann and Schelling were honored ``for having enhanced our understanding of conflict and cooperation through game-theory analysis,'' the Stockholm-based Royal Swedish Academy of Sciences, which selects the winner, said today on the Nobel Web site. The winners share 10 million Swedish kronor ($1.3 million).

Schelling, 84, an economist at the University of Maryland in College Park., wrote the 1960 book ``The Strategy of Conflict,'' describing game theory, or an interactive decision theory, as a unifying framework for the social sciences, the academy said.

``Schelling showed that a party can strengthen its position by overtly worsening its own options, 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,'' the academy said. ``These insights have proven to be of great relevance for conflict resolution and efforts to avoid war.''

Aumann, 75, a mathematician at Hebrew University in Jerusalem, was the first to conduct experiments of so-called infinitely repeated games, the academy said.

``The repeated-games approach clarifies the raison d'etre of many institutions, ranging from merchant guilds and organized crime to wage negotiations and international trade agreements,'' the academy said today." [Fonte]