Americans Leonid Hurwicz, Eric S Maskin and Roger B Myerson won the Nobel prize for Economics on Monday for developing a theory that helps explain situations in which markets work and others in which they don’t.
The three researchers “laid the foundations of mechanism design theory”, which plays a central role in contemporary economics and political science, the Royal Swedish Academy of Sciences said.

The academy said their research helped explain decision-making procedures involved in economic transactions including, for example, what insurance policies will provide the best coverage without inviting misuse.

Essentially, the three men, starting in 1960 with Hurwicz, studied how Game Theory can help determine the best, most efficient method for allocating resources given the available information, including the incentives of those involved. “Mechanism design theory, initiated by Leonid Hurwicz and further developed by Eric Maskin and Roger Myerson, has greatly enhanced our understanding of optimal allocation mechanisms,” the academy said.

Hurwicz, 90, is the oldest Nobel winner ever, the academy said. The Moscow-born researcher is an Emeritus professor of Economics at the University of Minnesota in Minneapolis. “I really didn’t expect it. There were times when other people said I was on the short list but as time passed and nothing happened I didn’t expect the recognition would come because people who were familiar with my work were slowly dying off,” he said.

Maskin, 56, is a professor at the Institute for Advanced Study at Princeton, New Jersey; and Myerson, 56, is a professor at the University of Chicago in Illinois. “I think this is a great privilege,” he said, adding he was inspired by the work of his fellow laureates. Maskin said he was relieved that Hurwicz was among the winners.

“Many of us had hoped for many years that he would win,” Maskin said. “He is 90 and we thought time was running out. It is a tremendous honor to have the opportunity to share the prize with him and with Roger Myerson.”