STOCKHOLM: US academics Paul Milgrom and Robert Wilson won the 2020 Nobel Economics on Monday for work on auctions hailed as benefiting buyers and sellers around the world of everything from fishing quotas to aircraft landing slots.
Among the insights of the two Stanford University economists is an explanation of how bidders seek to avoid the so-called "winner's curse" of over-paying, and what happens when bidders gain a better understanding of their rivals' sense of value.
"Auctions are everywhere and affect our everyday lives. This year's Economic Sciences Laureates, Paul Milgrom and Robert Wilson, have improved auction theory and invented new auction formats, benefiting sellers, buyers and taxpayers around the world," the Nobel Prize's official website tweeted.
Milgrom and Wilson notably came up with formats for selling interrelated items simultaneously. In 1994, US authorities used one of their auction designs to sell radio frequencies to telecom operators, a move since copied in other countries.
In a statement, Stanford, which with Milgrom and Wilson now counts 19 living Nobel laureates, said their design had been used worldwide to allocate over $100 billion of licences.
Wilson showed that rational bidders tend to place bids below their own best estimate of what he called the "common value" - that is, when the value of an item is deemed to be the same for everyone - for fear of paying too much.
Wilson showed that rational bidders tend to place bids below their own best estimate of what he called the "common value" - that is, when the value of an item is deemed to be the same for everyone - for fear of paying too much.
Milgrom complemented that with theories on "private values", when the perceived value of something differs from bidder to bidder.
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