Nobel Prize for Economics 2010 won by Peter Diamond, Dale Mortenson & Christopher Pissarides
October 11th, 2010 - 9:27 pm ICT by Aishwarya BhattStockholm, Oct 11 (THAINDIAN NEWS) This year’s Nobel Prize for economics has been awarded to three people whose work explained how market frictions can affect the smooth functioning of the economy.
The laureates are Peter Diamond, Dale Mortenson and Christopher Pissarides. They were honored with the award for their fundamental contributions to understanding how supply and demand are matched in the presence of transactions or search costs.
By their theory, the trio proved that having buyers and sellers agree on a price is not enough but the buyers and sellers must search themselves out and agree to enter into a transaction.
According to the trio’s “search and matching” theory, transactions do not happen automatically. Rather a costly and time-consuming search process is needed. The theory explains why it is possible to have supply and demand but no transaction.
The laureates have applied their theory to a wide range of markets. However the most important application of the theory has been on the labor markets. The theory explains why matching jobs and workers can be insufficient to reducing unemployment.
Two of the laureates, Mr. Peter Diamond and Mr. Dale Mortenson are lecturers at the Massachusetts Institute of Technology and the Northwestern University respectively while Mr. Christopher Pissarides works with the London School of Economics and Political Science.
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