By Andrew Stern

CHICAGO (Reuters) - Roger Myerson, co-winner of this year's Nobel Prize in Economics, gave credit on Monday to a long line of economists who preceded him, especially the 90-year-old colleague with whom he shared the prize.

"I was a little confused when they called," he said of the predawn news, but when they mentioned the other two winners -- Leonid Hurwicz of the University of Minnesota and Eric Maskin of Princeton -- he figured it out.

"I saw in my mind a list of names a lot longer than that," Myerson told a news conference at the University of Chicago, where he teaches. "I saw a list of Nobel laureates, which is an important canon that described the progress we've made in economics."

The three men were honoured for laying the foundations of an economic theory that determines when economic interaction and dialogue work most effectively.

The Royal Swedish Academy of Sciences said the three had established "mechanism design theory," which looks at how well different institutions fare in allocating resources and whether government intervention is needed. They will share a prize of 10 million Swedish crowns (768,000 pounds).

Applications of the theory include figuring out how best to organize an auction, determining the best way to motivate workers and improving mediation efforts when two sides are far apart, Myerson said.

He said the research involved has its roots in early 20th century arguments pitting socialism against capitalism at a time when most economic theory had to do with the allocation of limited resources.

But a "great breakthrough" came in 1972, when the Russian-born Hurwicz began discussing the need for economists to analyze the "problem of incentives and communication."