Roth, Shapley Win Nobel Economics Prize

By JOSH MITCHELL

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Reuters

Members of the Swedish Royal Academy of Sciences announced the winners of the Nobel economics prize Monday to Americans Alvin Roth and Lloyd Shapley.

Two Americans won the Nobel Prize in economics Monday for research that has improved the way people are matched with limited resources, such as kidney donations and urban high-school admissions.
Alvin E. Roth, a Harvard University professor who will soon permanently work at Stanford University, and Lloyd S. Shapley of the University of California Los Angeles were honored "for the theory of stable allocations and the practice of market design," the Royal Swedish Academy of Sciences said.

Their research has been applied by public and private institutions in various areas. New York City and other urban districts have used it when assigning students to high schools, ensuring that more students are matched with their top preferences. The research also has been used to match medical residents with hospitals, and donated kidneys with patients. The work is designed to help determine the fairest and most efficient way to match people and things when the traditional market force—prices—isn't involved.
The academy said the pair's combined work "has generated a flourishing field of research and improved the performance of many markets."

Real Time Economics

Alvin Roth and Lloyd Shapley were lauded for their research on how to match different agents in markets, such as job seekers with employers. Find out more about their work in this Real Time Econ post.

Messrs. Shapley and Roth worked independently, rather than together. Mr. Shapley, 89 years old, was cited for his groundbreaking research, beginning in the 1950s, developing mathematical methods to match people and things. Mr. Roth, 60, later used that theoretical research to address real-world problems—among other things, he helped redesign New York City's high-school selection process in the early 2000s. The algorithm designed by Mr. Roth and his colleagues—and based on Mr. Shapley's research—led to a 90% reduction in the number of students assigned to schools for which they had expressed no preference, the academy said.
In a phone interview broadcast during a media conference in Sweden, Mr. Roth joked, "When I go to class this morning, my students will pay more attention."
He said in a separate interview his field of study has improved many peoples' lives because, among other things, it has helped school districts be more responsive to families' preferences for where their children attend school. "School places are scarce resources. What's a good place for one child may differ from child to child," Mr. Roth said, adding that his algorithms are intended to make better use of the information parents provide to best suit their children's needs. "It would be a shame not to use that information well."

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Mr. Shapley couldn't be reached to comment. The academy said Mr. Shapley's research has helped to ensure "stable matching" and "limit agents' motives for manipulating the matching process. Shapley was able to show how the specific design of a method may systematically benefit one or the other side of the market."
The prize is formally known as the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.