ABSTRACT
The 2005 Nobel Prize in Economic Sciences was awarded to Robert Aumann and Thomas Schelling for contributions to ‘our understanding of conflict and cooperation’ by ‘extending and applying game theory’ (Royal Swedish Academy of Sciences, 2005a, p. 1(4)).1 The citation pointed out the importance of Schelling’s work on strategic aspects of negotiations, much of which was written against the backdrop of the Cold War. It also referred to Schelling’s analysis of the aggregate patterns that can arise from individual behavior as in his model of residential segregation. Aumann’s contribution is seen to rest with the explanation of cooperation in the long run, along with his explorations of common knowledge and correlated equilibrium. Both authors are cited for showing the logic behind seemingly irrational behavior.2
