British-born Oliver Hart and Bengt Holmstrom of Finland won the Nobel Memorial Prize in Economic Sciences for their contributions to contract theory, shedding light on how contracts help people deal with conflicting interests.
Their findings on contract theory have implications for corporate governance, bankruptcy legislation and political constitutions, among other fields, said the Royal Swedish Academy of Sciences, which announced the 8 million Swedish crown ($ 928,000) prize.
“This theory has really been incredibly important, not just for economics, but also for other social sciences,” said Per Stromberg, member of the prize committee and professor at the Stockholm School of Economics to Reuters.
Contract theory can be used to analyse performance-based pay for CEOs or deductibles and co-pays for insurance.
The economics prize is not an original Nobel Prize. Formally called the Nobel Memorial Prize in Economic Sciences, it was added to the others in 1968 by Sweden’s central bank.
The Nobel Prizes in medicine, physics, chemistry and the Nobel Peace Prize were announced last week. This year’s Nobel announcements will finish Thursday with the literature award.
The laureates will collect them on Dec 10, the anniversary of prize founder Alfred Nobel’s death in 1896.
