Economists Paul R. Milgrom and Robert B. Wilson have been awarded the 2020 Nobel Prize in Economics in recognition of their studies on auctions. According to the organization, they have developed “improvements in theory and invented new auction formats.”
“Auctions are everywhere and affect our daily lives,” explained the Academy when announcing the names of the winners. Milgrom and Wilson “have improved auction theory and invented new auction formats, benefiting sellers, buyers and taxpayers around the world,” added the Academy. Of Wilson the Academy noted that his work “showed why rational bidders tend to place bids below their best estimate of common value: they are concerned about the winner’s curse, that is, paying too much and losing.”
As for Milgrom, “he formulated a more general theory of auctions that not only allows common values, but also private values that vary from one bidder to another.” Both “not only clarified how auctions work and why bidders behave in certain ways, but used their theoretical insights to invent entirely new auction formats for the sale of goods and services.”
“This year’s economics laureates began with the fundamental theory and then used their results in practical applications, which have spread throughout the world. Their discoveries are of great benefit to society,” said the president of the Award Committee, Peter Fredriksson.
The Swedish Academy indicated that in 1994, the US authorities first used one of the auction formats of the two winners now to sell radio frequencies to telecommunications operators and that, since then, many other countries have followed suit. He recalled that “currently, at auctions, objects worth astronomical sums of money change hands every day, not only household objects, art and antiques, but also values, minerals and energy” and that public acquisitions “are also can be held as auctions. ”
Using auction theory, researchers try to understand the results of different bidding rules and final prices, the auction format. The Academy said that “the analysis is difficult, because the bidders behave strategically, based on the information available. They take into consideration both what they know themselves and what they think other bidders know.”
The Nobel Prize in Economics, whose real name is the Alfred Nobel Memorial Prize in Economic Sciences, is the only one of the six awards not created in its day by the Swedish magnate, but was instituted in 1968 from a donation to the Foundation Nobel Prize from the Swedish National Bank on the occasion of its 300th anniversary.
The Medicine award opened last Monday the round of announcements of the present edition of these prestigious awards, followed by the Fípara sica, Chemistry and Peace awards, last Friday. Both the announcements of the prizes and the delivery of this edition of the Nobel are in a reduced format due to the coronavirus pandemic.