Stockholm, October 10:

Israeli and US citizen Robert J Aumann and American Thomas C Schelling won the 2005 Nobel Memorial Prize in Economic Sciences today for their work on game theories that help explain economic conflicts, including trade and price wars. “Why do some groups of individuals, organisations and countries succeed in promoting cooperation while others suffer from conflict?” the Royal Swedish Academy of Sciences said. The pair were cited “for having enhanced our understanding of conflict and cooperation through game-theory analysis,” the academy said. Aumann (75) and Schelling (84) have helped to “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 in its citation, “The repeated-games approach clarifies the reason d’etre of many institutions, ranging from merchant guilds and organised crime to wage negotiations and international trade agreements.”

Schelling is a professor at the University of Maryland’s department of economics and a professor emevitus at Harvard. He “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, a professor at the Center for Rationality at the Hebrew University of Jerusalem, was cited for his work in looking how real-world situations can affect the theory. “In many real-world situations, cooperation may be easier to sustain in a long-term relationship than in a single encounter.” “Analyses of short-run games are, thus, often too restrictive,” the academy said, “Robert Aumann was the first to conduct a full-fledged formal analysis of so-called infinitely repeated games. His research identified exactly what outcomes can be upheld over time in long-run relations.” Aumann was born in Frankfurt, Germany, but holds US and Israeli citizenship. He is not the first Israeli to win the economics prize.

Out of the will

STOCKHOLM: The economics prize, worth $1.3 million, is the only one of the Nobel awards not established in the will of Swedish industrialist Alfred Nobel, the inventor of dynamite. The medicine, physics, chemistry, literature and peace prizes were first awarded in 1901, while the economics prize was set up separately by the Swedish central bank in 1968. The Nobel prizes are presented on December 10. — AP