The two have been awarded for their contributions to contract theory, helping the understanding of issues like the performance-based pay for top executives.
Chairman of the Economic Prize Committee, Per Stromnbers, says their work has laid an intellectual foundation for designing policies and institutions in many areas.
"This is very fundamental and the theories that Hart and Holmstrom have developed are incredibly important for us to understand these types of contracts and institutions."
Hart is an economics professor at Harvard University while Holmstrom is professor of economics and management at the Massachusetts Institute of Technology.
This year's Nobel announcements will finish later this week with the literature award.
