Nobel Prize for Economics

Still no prize for Mathematics.

Nobel Prize for Economics

Nobel Prize for Economics 2007 has been announced. Three Americans are sharing the prize money among them, for their work on mechanism design theory. Mechanism design theory is a sub field of Economics which deals with the study of markets with improper information and doesn’t work properly.

Mechanism Design Theory

The theory helps explain how incentives and private information affect the functioning of markets, for example, which IPO will do good.

Face-to-face trading interactions on the New York Stock Exchange trading floor. Financial decisions can be one of those many economic choices people make.

(A market in operation)

It also helps explain how sellers and buyers can maximise their gain from a transaction, everything from negotiations over labour issues to the auctioning of government bonds and has helped countries and companies better understand how markets function even when conditions are rocky.

Even countries used this method to study of alternate markets.

Game Theory

It is developed mostly from Game theoretical lines. Mechanism design is applied to situations where detailed data is not available to define the market, and market itself exists in vague – much like ‘game theory’.

They studied how game theory could help determine the best, most efficient method for allocating resources given the available information, including the incentives of those involved.

Math involved

Although there is no separate Nobel prize for Mathematical achievements, prize given to Economics very often is considered to continuation of mathematical work. Economics it self is considered to as an application of math.

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