An American and an Israeli won the 2005 Nobel prize for economics on Monday for their work on "game theory", which can help explain and resolve trade and business conflicts, and even play a role in avoiding war.
The Royal Swedish Academy of Sciences gave the 10 million crown ($1.3 million) prize to Thomas Schelling and Robert Aumann for work that has found uses in "security and disarmament policies, price formation on markets, as well as economic and political negotiations".
Aumann, 75, was born in Germany but is an Israeli and US citizen who teaches at the Hebrew University of Jerusalem. Schelling, 84, teaches at the University of Maryland.
"Game theory" is the science of strategy and attempts to determine what actions different "players" - such as trading partners, employers, unions or even organised crime groups - should take to secure the best outcome for themselves.
Game theory work has won the Nobel before. John Nash, the mathematician whose life was portrayed in the movie "A Beautiful Mind", won the economics prize with two others in 1994.
"I think game theory creates ideas that are important in solving and approaching conflict in general," Aumann told the awards ceremony by telephone from Israel.
Asked whether it could help solve the Israeli-Palestinian conflict, he said: "I do hope that perhaps some game theory can be used and be part of this solution."
Schelling told Reuters by telephone from his home in Maryland that he was glad to have his work recognised.
"I'm a student of co-operation and conflict, I'm not really a game theorist...I would not try very hard to make the case that what I do is economics," he said.
Schelling, whose career began with work on the US Marshall Plan to help rebuild Europe after World War Two, has applied game theory to global security and the Cold War arms race.
In particular, he has tried to explain how a taboo around nuclear weapons after the bombing of Hiroshima in 1945 itself became a factor in deterring their use after World War Two, even as both sides of the Cold War amassed big nuclear arsenals.
In a 1978 work, Schelling also used examples from everyday life, such as the difficulty in trying to get ice-hockey players to overcome their fear of being at a competitive disadvantage and wear helmets, even though it would protect their heads.
Aumann was cited for his analysis of "infinitely repeated games" to identify what outcomes can be maintained over time.
"Insights into these issues help explain economic conflicts such as price wars and trade wars, as well as why some communities are more successful than others in managing common-pool resources," said the Academy citation.
Aumann had not decided what to do with the prize money. "I am totally overwhelmed. I had absolutely no idea," he said.
He told a news conference in Jerusalem that game theory had become a cornerstone of economics world-wide.
"This is a badge of honour for this branch of science, for game theory," he added.
The economics prize was not one of the original awards for medicine, physics, chemistry, peace and literature set up in the will of Swedish dymamite millionaire Alfred Nobel in 1895.
It was added to the list in 1968 in memory of Nobel by the Swedish central bank.
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