3 Share Nobel Prize for Economics Work Americans, German Pioneered Game Theory

Article excerpt

Two Americans and a German won the Nobel Memorial Prize in economics Tuesday for pioneering work that shows companies do business, governments make decisions and armies fight battles much the way people play poker and chess.

Sharing the $930,000 prize are Hungarian-born John C. Harsanyi, a retired professor from the University of California at Berkeley; John F. Nash, a mathematician at Princeton University; and Reinhard Selten of the University of Bonn.

Their discoveries have had a "tremendously important impact" on many disciplines, said the chairman of the Nobel committee that awarded the prize, Assar Lindbeck of the Royal Swedish Academy.

As early as the 1950s the three researchers began work in game theory, a relatively new branch of mathematics that arose out of efforts earlier in the century to understand competition and cooperation.

Using models such as chess and poker, the theory has developed into a major tool in characterizing modern life. One of its key features is the ability to predict when to bluff, whether the players be companies or people at a card table.

Game theory is widely applied not only in economics but also in psychology, military and political science, helping to explain the strategic interaction between individuals, business and nations alike.

Harsanyi, speaking from his home in San Francisco, said the theory "eventually . . . will give us a higher standard of living because we make better decisions."

Selten said, "It has some similarity with parlor games, which are used in models. …