Peter A. Diamond, Dale Mortensen and Christopher Pissarides are sharing the 2010 Nobel Prize in Economic Sciences for research into the difficulties of matching supply and demand, particularly in the labor market.

“This year’s three Laureates have formulated a theoretical framework for search markets” such as ones where buyers look for sellers and applicants look for jobs, the Royal Swedish Academy of Sciences, which selects the winner, said Monday in Stockholm.

Diamond, 70, is an MIT professor and a candidate for the Federal Reserve Board whose nomination has been held up by Senate Republicans. Pissarides, 62, teaches at the London School of Economics, and Mortensen, 71, is on the faculty at Northwestern University.

“Peter Diamond has analyzed the foundations of search markets,” the academy said. “Dale Mortensen and Christopher Pissarides have expanded the theory and have applied it to the labor market. The laureates’ models help us understand the ways in which unemployment, job vacancies, and wages are affected by regulation and economic policy.”

Search theory tries to explain such problems as how high unemployment can be accompanied by a large number of job openings. One conclusion is that more generous jobless benefits lead to higher unemployment as those who are looking for work take longer to find it, the academy said.

Diamond, a former teacher of Fed Chairman Ben Bernanke, was nominated by President Obama for a Fed governor’s seat in April, subject to confirmation by the Senate. The nomination was later returned to the White House because of objections from at least one unidentified senator. Obama resubmitted Diamond’s name on Sept. 13.

Sen. Richard Shelby, R-Ala., the senior Republican on the Banking Committee, called Diamond a “skilled economist” while questioning whether he has sufficient expertise in monetary policy to be a Fed governor.

Diamond’s research spans a wide range. His earliest work, published in the 1960s, focused on the long-term effects of the growing national debt on the economy.

In a paper written in 2005 with Peter Orszag, who stepped down as Obama’s budget director in July, Diamond argued that Social Security’s long-term financial health could be restored through modest cuts in benefits and tax increases.

They opposed then-President George W. Bush’s proposal to establish individual retirement accounts under Social Security, saying the system could be saved without radical reform.

Diamond has analyzed the effects of taxation on growth and is considered a pioneer in the study of optimal taxation, which has been applied to pricing by public utilities.

Pissarides, a native of Cyprus, made his reputation for his work on job flows and unemployment. He related job creation to the number of unemployed, the number of vacancies, and the intensity with which workers look for jobs and companies recruit applicants. The more eagerly job seekers look for work, the more jobs companies are likely to offer because it will be easier to fill them, according to Pissarides.

Pissarides received his bachelor’s and master’s degrees in economics from the University of Essex and his doctorate from LSE in 1973. After a brief stint in the research department at the Central Bank of Cyprus in 1974, Pissarides entered academia and has been an LSE professor since 1986.

He is also a research fellow at the Center for Economic Policy Research in London and the Institute for the Study of Labor in Bonn, and a member of the Monetary Policy Committee of the Central Bank of Cyprus.

Mortensen, 71, received a bachelor’s degree in economics from Willamette University in Salem, Ore., in 1961 and a doctorate in economics from Carnegie-Mellon University in Pittsburgh in 1967.

A member of the faculty at Northwestern since 1965, Mortensen has also served as visiting professor at the University of Essex in the United Kingdom, Hebrew University in Jerusalem and Cornell University in Ithaca, New York.

In his research, he found that labor-market rigidities can cause unemployment as job-seekers look for the best work at the highest pay. The intensity of that job search determines how long workers stay unemployed and in turn can be affected by changes in the level and duration of jobless benefits.