Read what the Royal Swedish Academy of Sciences has to say about the work it honored:
Still don't understand what these Nobel winners developed? Here's an explanation for non-economists from the "Marginal Revolution" blog.
Americans Leonid Hurwicz, Eric S. Maskin and Roger B. Myerson were awarded the Nobel Memorial Prize in Economic Sciences on Monday for developing a theory that helps explain situations in which markets work and others in which they don't.
The three researchers "laid the foundations of mechanism design theory," which plays a central role in contemporary economics and political science, the Royal Swedish Academy of Sciences said.
"Mechanism design theory, initiated by Leonid Hurwicz and further developed by Eric Maskin and Roger Myerson, has greatly enhanced our understanding of optimal allocation mechanisms," the academy said, "accounting for individuals' incentives and private information."
Their theory lets economists, governments and businesses "distinguish situations in which markets work well from those in which they do not," the academy said in its citation.
"It is a huge honor, I'm just overwhelmed to have my name on that list," Myerson told Sweden's TV4 network.
Hurwicz, 90, who was born in Moscow, is a professor of economics at the University of Minnesota in Minneapolis. Maskin, 56, is professor at the Institute for Advanced Study at Princeton, N.J.; and Myerson, 56, is a professor at the University of Chicago in Illinois.
The academy said their research helps explain mechanisms and decision-making procedures involved in economic transactions, for example, what insurance polices will provide the best coverage without inviting misuse.
The economics award is not one of the original Nobel Prizes. It was created in 1968 by the Swedish central bank in Nobel's memory.
Last year American Edmund S. Phelps won the prize for explaining the relationship between inflation and unemployment, work that has had a profound impact on macroeconomic policy.
Nobel Prize winners receive a $1.5 million prize, a gold medal and a diploma from the Swedish king.
From Associated Press reports.