Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: WEDNESDAY, October 12, 1994                   TAG: 9410120065
SECTION: BUSINESS                    PAGE: B-8   EDITION: METRO 
SOURCE: Associated Press
DATELINE: STOCKHOLM, SWEDEN                                LENGTH: Medium

GAMES-THEORY WORK EARNS NOBEL PRIZE

Sharing the $930,000 prize are Hungarian-born John C. Harsanyi, a retired professor from the University of California at Berkeley; John F. Nash, a mathematician at Princeton University; and Reinhard Selten of the University of Bonn.

Their discoveries have had a ``tremendously important impact'' on many disciplines, said the chairman of the Nobel committee that awarded the prize, Assar Lindbeck of the Royal Swedish Academy.

As early as the 1950s the three researchers began work in game theory, a relatively new branch of mathematics that arose out of efforts earlier in the century to understand competition and cooperation.

Using models such as chess and poker, the theory has developed into a major tool in characterizing modern life. One of its key features is the ability to predict when to bluff, whether the players be companies or people around a card table.

Game theory is widely applied not only in economics but also in psychology, military and political science, helping to explain the strategic interaction between individuals, business and nations alike.

``Eventually it will give us a higher standard of living because we make better decisions,'' Harsanyi said from his home in San Francisco.

``It has some similarity with parlor games, which are used in models.'' Selten said from his home in Koenigswinter, Germany.

``The analysis of these models ... makes it easier for you to understand a lot of strategic interaction,'' said Selten, the first German citizen to be awarded a Nobel economics prize.

Nash, a mathematician, was singled out for developing what has become known as the ``Nash Equilibrium,'' a formula for figuring out when it is pointless for a player to change strategy.

Selten, who co-wrote a book with Harsanyi on equilibrium selection in games, followed up on Nash's research by creating several such situations and comparing the decisions of their players.

Harsanyi carried the ideas further with his theory of games of incomplete information, in which players don't know all the rules of the game, a situation more like the real world.

It was the second time the economics prize, awarded since 1969, was shared three ways. The prize is awarded by the Swedish Central Bank in memory of Alfred Nobel, the industrialist who invented dynamite.