Cyprus

Christopher Pissarides and American economists Peter Diamond and Dale Mortensen received the Nobel Prize “for their analysis of markets with search frictions. The subject of the Prize Lecture by Christopher Pissarides was “Equilibrium in the Labour Market with Search Frictions”. Christopher Pissarides and Dale Mortensen systematically developed and applied the theory proposed by Peter Diamond in a model that became known as the Diamond-Mortensen-Pissarides (DMP) model. This deals with markets with search friction, in which the cost, time, and effort spent by economic agents on searching and matching are central. The main assumption is that players behave rationally. The two economists reached two paradoxical conclusions regarding unemployment: it is a factor of equilibrium and it is an efficient vehicle to move workers from one productive activity to another (which would be considerably harder if there was full employment), contributing to a better functioning of the economy.