The Nobel Prize for economics was awarded yesterday to Thomas Schelling and Robert Aumann for their individual contributions to the understanding of conflict and co-operation.

Both were pioneers in "game theory", a branch of economics that now dominates the subject and is extremely important in other disciplines such as political theory, sociology and biology. They will share the €1 million prize.

Born in 1921, Professor Schelling, a professor at the University of Maryland, developed a theory of conflict situations that strongly influenced US attitudes towards nuclear deterrence during the cold war.

His 1960 book, The Strategy Of Conflict, highlighted the importance of precommitment, brinkmanship and credible threats as strategic weapons in a tense stand-off between two parties. By limiting your own options, for example, you can make it clear to opponents how you will respond to their actions, whatever they do, thereby increasing the chances the other side will back down.

Credible threats could also be made with brinkmanship, gradually increasing the probability of a conflict, Mr Schelling observed, adding that children understood brinkmanship perfectly.

Applied to the nuclear arms race, the theories gave the US its strategies to deal with the fundamental problem of how to get some use from weapons so terrible that their use could not be contemplated.

Outside the geo-political sphere, Mr Schelling also found that people co-operated more readily than a group of them behaving rationally would.

Mr Aumann's contribution to strategic thinking around the subject of conflict and co-operation came in using logic and mathematics to understand the options available to people when they face the same opponents or competitors day in, day out.

When strategic situations are repeated a considerable number of times, even when individuals have immediate conflicts of interest, the opportunity for building co-operation increases because the individuals have to deal with the other side again and again in the future.

The analysis of "repeated games", which Mr Aumann started, is now a mainstream part of all social sciences and applied to issues as diverse as political conflicts, irrigation systems, international treaties and collusion among companies.

Game theory was also the subject of the Nobel Prize for economics sciences in 1994, when it was won by John Harsanyi, John Nash and Reinhard Selten.