Who Is Roger B. Myerson?

Roger B. Myerson is a game theorist and economist who won the 2007 Nobel Memorial Prize in Economic Sciences, along with Leonid Hurwicz and Eric Maskin. Myerson's award-winning research helped to develop mechanism design theory, which analyzes the rules for efficiently coordinating economic agents when they have different information and challenges trusting one another.

Key Takeaways

  • Roger Myerson is a game theorist and economics professor at the University of Chicago.
  • Myerson's research has focused on the theory of cooperative games where multiple players have different information, within an area known as mechanism design theory.
  • Myerson received the 2007 Nobel Prize for his work in laying the the foundations of mechanism design theory.

Understanding Roger B. Myerson

Roger B. Myerson was born in Boston in 1951, and he earned a PhD in applied math from Harvard. He was a professor of economics at Northwestern University's Kellogg School of Management for 25 years and then became a professor of economics at the University of Chicago, where he is currently listed as a Glen A. Lloyd Distinguished Service Professor of Economics. He is the author of Game Theory: Analysis of Conflict, published in 1991, and Probability Models for Economic Decisions, published in 2005, as well as of numerous academic journal articles.

Myerson aught for 25 years in the Kellogg School of Management at Northwestern University before coming to the University of Chicago in 2001. He is a member of the American Academy of Arts and Sciences, the National Academy of Sciences, and the Council on Foreign Relations. He has received several honorary degrees, and he received the Jean-Jacques Laffont Prize in 2009. He was awarded the 2007 Nobel Memorial Prize in Economic Sciences in recognition of his contributions to mechanism design theory, which analyzes rules for coordinating economic agents efficiently when they have different information and thus difficulty trusting each other.

Contributions

Myerson has contributed primarily to the field of game theory with application to economics and political science.

Cooperative Games with Incomplete Information

Myerson refined Nash's equilibrium concept and developed techniques to characterize effects of communication between rational agents with differing information. Many of his developments are now widely used in economic analysis, such as the revelation principle and the revenue-equivalence theorem in auctions and bargaining. His applied game-theoretic tools are also used in the field of political science to analyze how political incentives can be affected by different electoral systems and constitutional structures.

Equivalence Theorem

Myerson's revenue equivalence theorem, now widely used in auction design, was his major contribution to mechanism design theory. Mechanism design theory explains how institutions can achieve social or economic goals given the constraints of individuals' self-interest and incomplete information.

Revenue equivalence theorems show how the expected revenue of an auction to the seller are equivalent (and the conditions under which they may not be). Myerson's equivalence theorem shows that in order for two parties to efficiently agree to a trade when they each have secret and probabilistically varying valuations of a good, they must take the risk that one of them will trade at a loss. On the other hand, it demonstrates mathematically how individuals with information secret from others can extract economic value whenever the allocation of economic resources depends on their information. This has important implications for economic problems involving asymmetric information, such as adverse selection and moral hazard. 

Governance and Electoral Systems

Myerson also applied game theory to explore how different constitutional and electoral systems influence political outcomes. His work in this area shows how different electoral and voting rules can impact the incentives and behavior of politicians and political candidates to either increase competition in elections or reinforce corrupt, extractive behavior by established politicians. He also analyzed how various constitutional systems of division of power among executive and legislative bodies can determine the effectiveness of political parties and coalitions.