Game theorists share economics Nobel

The 2005 Nobel Prize in Economics - or rather, The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel - has been awarded jointly to Robert Aumann and Thomas Schelling "for having enhanced our understanding of conflict and cooperation through game-theory analysis".

“I am both shocked and surprised – right now it’s hard to gather my thoughts,” said 84 year old Thomas Schelling to TT, just half an hour after he got the call from the Nobel organisation.

Schelling, who works at the University of Maryland in the United States, formed his ideas on why some groups of individuals, organizations and countries succeed in promoting cooperation while others suffer from conflict against the backdrop of the Cold War in the 1950s.

In his book The Strategy of Conflict, he showed that “a party can strengthen its position by overtly worsening its own options, the capability to retaliate can be more useful than the ability to resist an attack, and uncertain retaliation is more credible and more efficient than certain retaliation”.

“These insights have proven to be of great relevance for conflict resolution and efforts to avoid war,” wrote the Royal Swedish Academy of Sciences.

Robert Aumann, 75, has both Israeli and American citizenship and works at the Hebrew University of Jerusalem, Israel. With his analysis of “infinitely repeated games”, Aumann was the first economist to demonstrate that cooperation is easier to maintain if both “players” in a scenario take a long term perspective.

“The theory of repeated games enhances our understanding of the prerequisites for cooperation,” wrote the prize committee.

The pair will share the 10 million kronor prize money.

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