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MIT alumnus Aumann wins economics Nobel

MIT alumnus Robert J. Aumann is the co-recipient of the 2005 Nobel Prize in economics.

Aumann is the third MIT-affiliated Nobel laureate whose models for understanding conflict and decision-making -- known as game theory -- have been recognized with the famed $1.3 million prize.

Aumann, who received the Ph.D. in mathematics in 1955, shares the 2005 Nobel with Thomas Schelling. Both are pioneers in game theory. The Nobel citation describes their work as having "enhanced our understanding of conflict and cooperation through game-theory analysis."

A professor at the Center for Rationality at Hebrew University of Jerusalem in Israel, Aumann contributed the analysis of "repeated games" to strategic thinking about conflict and cooperation.

Using logic and mathematics to parse the options for cooperation available to people who face the same conflicts over and over again, he showed that cooperation increases when strategic situations are repeated. Even when there are immediate and pressing conflicts of interest, individuals have more opportunities to build cooperation if they expect to be dealing with the other side repeatedly in the future. Aumann's "repeated games" analysis is now a staple of social science, political and corporate practices.

Aumann's fellow laureates in game theory include an economist and a mathematician affiliated with MIT.

Joseph Stiglitz, who received the Ph.D. from MIT in 1966, co-won the Nobel Prize in economics in 2001 for his work on decision-making in situations in which players have varying levels of information. John F. Nash, MIT professor of mathematics from 1951 to 1959, co-won the Nobel Prize in 1994. Nash is known as the father of game theory; he created the "Nash equilibrium," which relates to players in a game who can neither communicate nor make cooperative decisions.

Another of Aumann's major contributions to game theory is the "correlated equilibrium," a concept that builds on and broadens the Nash equilibrium.

A native of Frankfurt, Germany, Aumann was born in 1930 and fled with his family to New York in 1938 to escape Nazi persecution.

He studied at New York's City College and then at MIT, earning his doctorate in pure mathematics (Knot Theory). His interest turned to game theory in 1956, when he joined the Mathematics Institute at Jerusalem's Hebrew University, where he has been ever since.

Aumann has published five books and more than 70 scientific papers. Among his other contributions are models of market economies in which the traders appear as a continuum, like the points on a line or the particles in a fluid, and a mathematical formulation of "common knowledge" among the agents in an interactive environment.

Aumann is a member of the (U.S.) National Academy of Sciences, the American Academy of Arts and Sciences, the Israel Academy of Sciences and Humanities and the British Academy. He holds honorary doctorates from the Universities of Bonn, Louvain and Chicago.

A version of this article appeared in MIT Tech Talk on October 19, 2005 (download PDF).

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