Elinor Ostrom of Indiana University and Oliver E. Williamson of the University of California at Berkeley, will share the prize, officially known as the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.
In its citation, the Royal Swedish Academy of Sciences on Monday lauded Ostrom “for her analysis of economic governance, especially the commons”, while Williamson was recognized “for his analysis of economic governance, especially the boundaries of the firm”.
"The research of Elinor Ostrom and Oliver Williamson demonstrates that economic analysis can shed light on most forms of social organization," the Swedish Academy said in a statement.
In her work, Ostrom showed how associations can successfully manage common property, challenging the conventional wisdom that common property should be either regulated or privatized if it is to be properly managed.
She is the first woman to ever receive a share of the Nobel economics prize.
Williamson, on the other hand, has argued that the differing conflict resolution mechanisms present in markets and hierarchical organizations justifies thinking of them as alternative governance structures.
While markets are characterized by wrangling and negotiation, firms do a better job at keeping a lid on conflict, but run the risk of having their authority abused.
According to Williamson, if competition is limited, firms can do a better job at resolving conflicts than the market can on its own.
“I'm still trying to let it sink in; that I'm one of the year's Nobel Prize winners,” Williamson told the TT news agency over the telephone from California.
“It' feels fantastic. I've had a fantastic academic career and I don't have to top it off with a Nobel Prize to be satisfied. But as things have developed, it's really a huge honour and satisfying to get a prize like thins which I'm sure will spread and develop the work that I and others have wrestled with.”
The 10 million kronor ($1.4 million) in prize money will be shared equally between the two.