Holmstrom: Professor Holmstrom

holmstrom: Professor Holmstrom has also served on the board of Finnish mobile phone company Nokia, according to Australian Broadcasting Corporation. Speaking to reporters in Stockholm by telephone, Professor Holmstrom said he felt "very lucky" and "grateful". In the 1970s, Professor Holmstrom showed how a principal, for example a company shareholders, should design an optimal contract for an agent, like the CEO. His "informativeness principle" showed how the contract should link the agent pay to information relevant to his or her performance, carefully weighing risks against incentives, the academy said. Both laureates are economics professors at universities in Cambridge, Massachusetts — London-born Professor Hart, 68, who is an American citizen, works at Harvard University, while Professor Holmstrom, a 67-year-old Finnish citizen, works at Massachusetts Institute of Technology. Professor Hart made fundamental contributions to a new branch of contract theory in the mid-1980s. The economics prize, officially called the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, was established in 1968. His findings on "incomplete contracts" shed new light on the ownership and control of businesses, the academy said. "His research provides us with theoretical tools for studying questions such as which kinds of companies should merge, the proper mix of debt and equity financing, and which institutions such as schools or prisons ought to be privately or publicly owned," the academy said. (news.financializer.com). As reported in the news.