Peter Diamond and Dale Mortensen of the US and British-Cypriot Christopher Pissarides won the 2010 Nobel Economics Prize on Monday for work on why supply and demand do not always meet in the labour market and elsewhere.

The prize highlights one aspect of a policy-making problem which has bedevilled governments of advanced countries since the oil shocks of the 1970s: high unemployment which has risen even higher because of the global economic crisis

The jury lauded the trio "for their analysis of markets with search frictions," which helps explain how unemployment, job vacancies, and wages are affected by regulation and economic policy.

According to traditional theory, labour markets should work on their own, with job seekers finding available jobs, thus creating balance.

The three Nobel laureates however help show with their model -- the Diamond-Mortensen-Pissarides, or DMP model -- that markets do not always work in this way.

Owing to small glitches, buyers may find it difficult to find sellers and job seekers may not find the employers looking to fill a position.

For instance, a small cost faced by employers looking for labour may mean they decide not to take on workers even though they need them.

The trio\'s model helps explain why unemployment persists and proves stubbornly resistant even when economic circumstances improve.

It also helps identify areas for government policy action, pinpointing for instance what governments can do to improve employment and prevent long-term unemployment through training.

The jury noted the trio\'s work in search theory can also be applied to a number of other areas besides the labour markets, including the housing market and public economics.

Diamond, 70, is associated to the Massachusetts Institute of Technology, Mortensen, 71, is associated to Northwestern University and Pissarides, 62, is at the London School of Economics.

The Economics Prize is the only one of the six Nobel prizes not created in Swedish industrialist Alfred Nobel\'s 1896 will. It was introduced in 1968 to celebrate the tricentary of the Swedish central bank and was first awarded in 1969.

Last year, Elinor Ostrom -- the first woman to ever win -- and Oliver Williamson of the United States won the Economics Prize for their work on the organisation of cooperation in economic governance.

The 2010 Nobel season peaked on Friday with the awarding of the prestigious Peace Prize to jailed Chinese dissident Liu Xiaobo, which sparked calls for his release from the West and a furious condemnation by China.

On Thursday, Peru\'s Mario Vargas Llosa won the other most closely watched Nobel, the Literature Prize. Like Liu, he had long been tipped as a possible winner.

The 2010 Nobel season began on Monday October 4 with the Medicine Prize, which went to Bob Edwards, the in-vitro fertilisation pioneer who enabled millions of couples struggling with fertility problems to become parents.

The Physics Prize followed on Tuesday, awarded to Russian-born researchers Andre Geim and Konstantin Novoselov for their ground-breaking work on graphene, a form of carbon touted as the wonder material of the 21st century.

Richard Heck of the United States and Ei-ichi Negishi and Akira Suzuki of Japan won the Chemistry Prize Wednesday for forging a toolkit to manipulate carbon atoms, paving the way for new drugs to fight cancer and for revolutionary plastics.

The Peace Prize will be handed out in Oslo on December 10, the anniversary of the death of Swedish industrialist Alfred Nobel, who founded the prizes.

Other Nobel laureates will pick up their prizes in Stockholm on the same day.