STOCKHOLM, Oct 15: US scholars Alvin Roth and Lloyd Shapley won the Nobel Economics Prize on Monday for their work on how to best match supply and demand that has potential applications in organ donation, education and on the Internet.
The two were honoured for “the theory of stable allocations and the practice of market design,” the Royal Swedish Academy of Sciences said.
The work can be used to help match donors of human organs with patients in need of a transplant, or students with universities, or Internet search engines that auction space for advertisers.
Roth, 60, is a professor at Harvard Business School in Boston, Massachussets, while Shapley, 89, is a professor emeritus at the University of California.
Roth told public broadcaster Swedish Television he was surprised to win the award.
“No it wasn’t expected. But it is certainly expected that Lloyd Shapley won the prize ... I’m glad to share it with him,” he said.
Roth said he was happy that the prize would “shine a very bright spotlight on the work” he and Shapley had done in market design, which Roth described as “a newish area of economics”.
The professor then quipped: “When I go to class this morning my students will pay more attention.”
Shapley’s age was mentioned in economic circles on Monday as a factor that may have been in his favour this year, even though his field of research isn’t one that hits the headlines very often.
In choosing market design theory for this year’s prize, the Royal Swedish Academy of Sciences avoided wading into a heated macroeconomic debate over fiscal policy, austerity measures and stimulus packages.
“We neither try to pick topics that are the subject of much debate, nor do we try to avoid them,” Per Krusell, chairman of this year’s Economic Sciences Prize Committee, said.
“This year’s prize just happens to ... not have any connection whatsoever, that I can see, to the financial crisis.”
Roth and Shapley worked independently of each other but “the success of their research is due to the combination of Shapley’s theoretical results with Roth’s insights into their practical value,” the committee said.
In a 1962 paper, Shapley applied the idea of stability to that of marriage.
How could individuals in a group of people be paired up when they all had different views on who would be their best match?
The best match-making was achieved by using what is now known as the Gale-Shapley “deferred acceptance” algorithm, a set of rules which aim to achieve a stable solution.
Roth and Shapley will receive the prize, consisting of a Nobel diploma, a gold medal and 8.0 million Swedish kronor ($1.2 million, 921,000 euros), at a ceremony in Stockholm on Dec 10, the anniversary of Swedish industrialist and prize creator Alfred Nobel’s death.—AFP