The US academics Paul R. Milgrom and Robert B. Wilson have been announced this year’s joint winners of the Nobel prize for economics.
The pair were confirmed as winners of 2020 Sveriges Riksbank Prize in Economic Sciences on Monday, in memory of Alfred Nobel. Each will receive 5 million Swedish Krona ($570,000, £440,000).
“Auctions are everywhere and affect our everyday lives,” said the Nobel Prize’s official Twitter account. The prize is decided by the Royal Swedish Academy of Sciences.
“This year’s Economic Sciences Laureates, Paul Milgrom and Robert Wilson, have improved auction theory and invented new auction formats, benefitting sellers, buyers and taxpayers around the world,” said the Nobel Prize’s official Twitter account.
Presenting the award, Swedish economist and prize committee chair Peter Fredriksson said their work on auctions had been “tremendously important” and that auctions affected everyone, from home sales to electricity auctions affecting household bills.
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Fredriksson said both had applied theory to “more realistic subjects,” with Wilson beginning his work on the subject in the 1960s and Milgrom in the 1980s. Both are academics at Stanford University in the US.
The Royal Swedish Academy of Sciences added in a press release: “Wilson showed why rational bidders tend to place bids below their own best estimate of the common value: they are worried about the winner’s curse – that is, about paying too much and losing out.
“Paul Milgrom formulated a more general theory of auctions that not only allows common values, but also private values that vary from bidder to bidder.
“He analysed the bidding strategies in a number of well-known auction formats, demonstrating that a format will give the seller higher expected revenue when bidders learn more about each other’s estimated values during bidding.”
It added that authorities in the US and other countries had used an auction format designed by the pair to sell radio frequencies to telecoms operators since the 1990s.
Dr Wilson said after receiving the news: “We’re very glad about it.”
The prize-winner was asked by journalists what the last thing he bought at auction was himself. “I’ve never actively participated in an auction personally,” he replied.
But he said adverts on search engines were usually sold at auction, and noted his wife had recently bought some ski boots on eBay.