Hart and Hollstrom won Nobel Prize in Economics 2016

The Nobel prize for economics in 2016 was awarded to Oliver Hart and Bengt Holmström, for the "contract theory" developed by the two U.S.-based economists.Their studies have mapped out an overall framework to understand agreements like insurance contracts, employer-employee relationships and property rights.

Hart is born in London and is economics professor at Harvard University while Holmstrom, Helsinki-born, is professor of economics and management at the Massachusetts Institute of Technology.

"(Their work) lays an intellectual foundation for designing policies and institutions in many areas, from bankruptcy legislation to political constitutions," the Royal Swedish Academy of Sciences said on announcing the 8 million Swedish crown ($928,000) prize.

Recently, Hart and Holmstroem also deepened many applications of their "contract theory", particularly as the analysis of optimal contractual agreement lays the basis for policy in different areas, from the legislation governing failures until overall structure of the constitutions of the states.

The economics prize, officially called the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, was established in 1968. It was not part of the original group of awards set out in dynamite tycoon Nobel's 1895 will.