KATHMANDU : The Royal Swedish Academy of Sciences has decided to award the ‘2020 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel’ to Paul R. Milgrom and Robert B. Wilson “for improvements to auction theory and inventions of new auction formats.”
According to the Academy, this year’s Laureates, Paul Milgrom and Robert Wilson, have studied how auctions work.
The two have also used their insights to design new auction formats for goods and services that are difficult to sell in a traditional way, such as radio frequencies. Their discoveries have benefitted sellers, buyers and taxpayers around the world.
“People have always sold things to the highest bidder, or bought them from whoever makes the cheapest offer. Nowadays, objects worth astronomical sums of money change hands every day in auctions, not only household objects, art and antiquities, but also securities, minerals and energy. Public procurements can also be conducted as auctions,” read the statement.
Using auction theory, researchers try to understand the outcomes of different rules for bidding and final prices, the auction format. The analysis is difficult, because bidders behave strategically, based on the available information. They take into consideration both what they know themselves and what they believe other bidders to know.
“Over time, societies have allocated ever more complex objects among users, such as landing slots and radio frequencies. In response, Milgrom and Wilson invented new formats for auctioning off many interrelated objects simultaneously, on behalf of a seller motivated by broad societal benefit rather than maximal revenue,” the statement added.
According to the statement, the US authorities first used one of their auction formats to sell radio frequencies to telecom operators in 1994, and many other countries have followed suit since then.