British-born Oliver Hart and Finland-born Bengt Holmstrom won the 2016 Nobel Economics Prize for their contributions to contract theory, helping the understanding of issues like the performance-based pay for top executives.

"(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.

Hart is economics professor at Harvard University while Holmstrom is professor of economics and management at the Massachusetts Institute of Technology.