Massachusetts Institute of Technology Professor Peter A. Diamond ’60 won the 2010 Nobel Memorial Prize for Economic Science Monday for his work developing models designed to understand markets in which buyers and sellers encounter obstacles in finding each other – particularly in the case of matching employees with employers.

Diamond was recognized along with his colleagues Dale T. Mortenson, a Professor at Northwestern University, and Christopher A. Pissarides, of the London School of Economics and Political Science. The Nobel Prize Commission awarded Diamond, Mortenson, and Pissarides the prize “for their analysis of markets with search frictions,” according to the organizations’ Web site.

Diamond analyzed job markets in which not all the demands of buyers will be met and sellers are not always able to sell as much as they hope to sell. The models developed by the three Laureates can help economists explore questions relating to unemployment, job vacancies, and wages – particularly the ways in which regulation and economic policy affect them.

The research of the laureates holds special significance during this period of high unemployment because it suggests that increased unemployment benefits can lengthen a recession by discouraging people from searching for work.

Ben Polak, the Economics Department chair, said that he was delighted to hear that Diamond had won the Nobel Prize.

“I hope his winning the Nobel prize will push people to go back and read some of his papers again,” Polak wrote in an e-mail message, citing some of Diamond’s papers in taxation, overlapping generation economies, and risk aversion as “classics” that have changed the way people view economics.

C. Lanier Benkard, Yale econometrics professor, said that Diamond has a well-known body of work, stating that he knows about it even though he is a micro-economist, and Diamond’s work largely applies to the macro-economic field.

He said Diamond’s award suggests that the prize committee appreciates that labor markets do not alway behave according to traditional models.

“There are things about the market you can’t explain without understanding market imperfections,” he said.

Diamond received his PhD from MIT in economics after graduating from Yale College in 1960. He then taught at the University of California, Berkeley, but returned to MIT as a faculty member in 1966 and has remained in Cambridge since then.

Diamond received recognition from President Obama when he was nominated in April for a position on the Federal Reserve Board. Although the Senate rejected Diamond’s nomination based on a procedural rule, Diamond is now back in the running after President Obama re-nominated him on September 12.