Economics has always been concerned with incentives. For a long time, however, most formal analyses of incentive issues were limited to the behavior of people or corporations in markets where the institutional environment was given. Since the 1960s, our understanding of incentives and incentive problems has been revolutionized by research contributions that identified asymmetric information and strategic interdependence as root causes of incentive problems and provided fundamental insights about the scope and the limits for dealing with these problems by institution design. The importance of this research was recognized by the award of the Prize in 1996 to Sir James Mirrlees and William Vickrey for their “fundamental contributions to the economic theory of incentives under asymmetric information” and in 2007 to Leonid Hurwicz, Eric Maskin, and Roger Myerson “for having laid the foundations of mechanism design theory”. The panel will discuss the underlying ideas and their development.