3 Americans share Nobel economics prize

WASHINGTON -- Three U.S. professors won the Nobel Memorial Prize in Economic Science on Monday for their work studying markets and the optimal way to bring together buyers and sellers, research that has everyday applications for everything from health insurance pricing to corporate pay incentives to auction formats.

Leonid Hurwicz, 90, of the University of Minnesota in Minneapolis, Eric Maskin, 56, of the Institute for Advanced Study in Princeton, N.J., and Roger Myerson, 56, of the University of Chicago won for their work on "mechanism design theory," an offshoot of game theory.

They will split the approximately $1.6 million prize.

"The theory allows us to distinguish situations in which markets work well from those in which they do not," the Royal Swedish Academy of Sciences said in a statement announcing the winners.

"It has helped economists identify efficient trading mechanisms, regulation schemes and voting procedures," the group said.

"We brought into economic analysis the problems of communication between people who have different information and different incentives, making it difficult for them to trust each other," Myerson says.

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Maskin says mechanism design theory involves a lot of math and formulas. But there is "heart" behind the work. The theory combines "the do-gooding urge and also the urge to be the disinterested and precise scientist," says Maskin, who lives in Albert Einstein's former home in Princeton, N.J., and is the third Nobel winner to live in the home.

In practice, mechanism design theory recently has been used to set up auctions when governments turn over public assets into private hands. In the USA, the theory was used to design airwave auctions for the Federal Communications Commission. In that case, economic theory helped the government balance two interests: the desire to see the airwaves in the hands of telecom companies that would put them to the best use while at the same time to raise money for the government, Maskin says.

Mechanism design theory has also been used worldwide in everything from economic development, government tax policy and election design.