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Nobel econ prize awarded
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October 8, 1996: 9:25 a.m. ET
Professors honored for theories on incomplete financial information
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NEW YORK (CNNfn) -- The 1996 Nobel Prize in Economics was awarded on Tuesday to Columbia University's Professor William Vickrey and Professor James Mirrlees of Cambridge University for research into the economics of financial information.
The Royal Swedish Academy of Sciences, which administers the Nobel prizes, said Vickrey and Mirrlees were awarded the $1.12 million economics prize for significant contributions to "the economic theory of incentives under asymmetric information" or the consequences of having incomplete financial information.
In practical terms, the academy said, their work has helped banks who do not have complete information about a client's future income, businesses without details about costs and competitive conditions, and insurance companies that cannot observe the responsibility a policyholder takes for insured property. Their research, performed separately over a more than 25-year span, also has helped governments devise income tax systems without much knowledge of individual citizens productivity.
Vickrey, a Professor Emeritus at Columbia University in New York who was born in Canada in 1914, performed much of his research in the late 1940s. The academy said his work on the elements of different types of auctions is now used in the auction of treasury bonds and band spectrum licenses. He also established an economic model used to balance income tax between efficiency and equity.
A quarter-century later, Mirrlees applied those theories to his own research and discovered a series of practical applications including situations where one side in a business arrangement cannot observe another's actions.
Mirrlees currently serves as a professor of economics at Cambridge University.
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