The 2012 Nobel Prize in Economics has been awarded to Alvin Roth of Harvard and Lloyd Shapley of UCLA for "the theory of stable allocations and the practice of market design." Roth, the George Gund Professor at Harvard and HBS, has close ties with BC economists Tayfun Sönmez and Utku Ünver. Their joint work on kidney exchange mechanisms appeared in the QJE (2004), J. Econ. Theory (2005), the AER (2005), Transplantation (2006) and the AER (2007). Their research was publicized in 2005 by the National Science Foundation, one of its sponsors, as an example of the importance of federal funding for social science research.
The
scientific background paper produced by the Economic Sciences Prize Committee of the Royal Swedish Academy of Sciences states:
Roth also has collaborated with Sönmez and others on research into improving school choice mechanisms in Boston (AER, 2005) and New York City. They are coauthors of the "Matching and Market Design" article in The New Palgrave Dictionary of Economics (2008).
Our congratulations to Prof. Roth and his coauthors--and to Stanford University's astute hire of Prof. Roth in a permanent position as of next January.
"Lloyd Shapley has led the development of cooperative game theory. His work
has not only strengthened its theoretical foundations, but also enhanced the
theory's usefulness for applied work and policy making. In collaboration with
D. Gale, H. Scarf and M. Shubik, he created the theory of matching markets.
Launching the theory, Gale and Shapley (1962) expressed the hope that one
day it would have practical applications. This hope has been fulfilled by the
emerging literature on market design.
The work by Alvin Roth has enhanced our understanding of how markets
work. Using empirical, experimental and theoretical methods, Roth and
his coauthors, including A. Abdulkadiroglu, P.A. Pathak, T. Sönmez and
M.U. Ünver, have studied the institutions that improve market performance,
thereby illuminating the need for stability and incentive compatibility. These
contributions led directly to the successful redesign of a number of important
real-world markets."