Two American economists won the Nobel Prize in Economic Sciences on Monday for improving the way auctions work and creating new auction formats that have benefited sellers, buyers and taxpayers around the world.
Paul Milgrom and Robert Wilson, who are based at Stanford University in California, designed new auction formats for good and services that are difficult to sell in a traditional way, including radio frequencies, airport landing slots and fishing quotas.
Their work resulted in crucial practical applications that have spread globally and “are of great benefit to society,” said Peter Fredriksson, chair of the Nobel committee.
Wilson, 83, developed the theory for auctions of objects with a common value, which is “uncertain beforehand but, in the end, is the same for everyone.”
Americans Paul R. Milgrom, left, and Robert B. Wilson have won the Nobel Prize in economics for ‘improvements to auction theory and inventions of new auction formats.’ (Anders Wiklund/)
Video: U.S. auction theory pioneers win Nobel economics prize (Reuters)
“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,” the committee said in a statement.
Milgrom, 72, formulated “a more general theory” that also allows for what is known as “private values.” His work demonstrates that “a format will give the seller higher expected revenue when bidders learn more about each other’s estimated values during bidding.”
Technically known as the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, the award caps a six-day series of Nobel prizes.
Wilson and Milgrom, who will share an estimated $1.1 million cash prize, join seven Americans who won awards this year. One of the 11 “laureates” was the United Nations’ World Food Program, which received the peace prize on Friday.
With News Wire Services