Professors from UCLA and Harvard University won the Nobel prize in economics for their work in microeconomic engineering on matching theory and improving the design and functioning of markets where prices generally are not used for allocation, according to a statement Monday by the Royal Swedish Academy of Sciences, which awards the prize.
Lloyd Shapley, professor emeritus of economics and mathematics at the University of California, Los Angeles, and Alvin E. Roth, George Gund Professor of Economics and Business Administration at Harvard University and Harvard Business School, were honored for their work in “stable allocations and the practice of market design,” according to a statement of the Economic Sciences Prize Committee of the Royal Swedish Academy of Sciences.
Mr. Roth, who also is visiting professor of economics at Stanford University, is scheduled to join Stanford as a full-time permanent faculty member in January and become professor emeritus at Harvard.
The two will share the 8 million Swedish krona ($1.2 million) Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.
Messrs. Shapley and Roth helped pioneer applications of game theory and experimental economics to new economic institutions, according to Stanford, Harvard, UCLA and Nobel statements.
“Matching is one of the most important functions of markets,” Mr. Roth has written according to the Stanford statement.
“In financial markets, both buyers and sellers make decisions based on prices,” Bruce I. Jacobs, principal, Jacobs Levy Equity Management, said in an e-mail. “This results in transactions that satisfy both parties, thus clearing the market. But there are markets without prices. … When there are no pricing signals, Shapley and Roth showed how to design a market mechanism to allocate resources so that the results best satisfy the preferences of both parties.”
Messrs. Shapley and Roth are scheduled to receive their award from King Carl XVI Gustaf of Sweden in a ceremony in Stockholm Dec. 10.