Three Americans won the Nobel Economics Prize yesterday for advances in ways to analyze markets that can be applied to both developing and advanced economies.
George A. Akerlof, 61, of the University of California at Berkeley, A. Michael Spence, 58, of Stanford University and Joseph E. Stiglitz 58, of Columbia University will share the 10 million kronor (US$943,000) award.
They were cited "for their analyses of markets with asymmetric information," which takes into account the fact that some market players have better information than others.
The laureates laid the foundation in the 1970s for a general theory about how that affected how information is exchanged and their contributions "form the core of modern information economics," the Royal Swedish Academy of Sciences said.
"Countless applications extend from traditional agricultural markets in developing countries to modern financial markets in developed economies," the citation said.
Their research can be used to explain everything from excessively high interest rates on local lending markets in Third World countries to why people looking for a good used car often will turn to a dealer rather than a private seller.
Akerlof's 1970 essay titled "The Market For Lemons," which refers to defective old cars, was described by the academy as the most important study in information economics because it shows that "hypothetically, the information problem can either cause an entire market to collapse or contract into an adverse selection of low-quality products."
Stiglitz quit his job as the World Bank's chief economist in 1999 to return to academic life after a controversial tenure in which he publicly criticized the austerity measures -- high interest rates and cuts in public spending -- that were favored as solutions to financial crises in Asia and Russia.
He was cited for contributions that "have transformed the way economists think about the working of markets."
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