The Nobel prize for Economics this year has been awarded to US academics Paul R. Milgrom and Robert B. Wilson.
The two were announced the winners of Sveriges Riksbank Prize in Economic Sciences on the 12th of October, with a cash prize of 5 million Swedish Krona ($570,000, £440,000).
The prize is decided by the Royal Swedish Academy of Sciences. It was tweeted on the Nobel Prize’s official twitter account, “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, benefitting sellers, buyers and taxpayers around the world.”
Prize committee chair and Swedish economist while presenting the award said that their work on auctions had been hugely significant, and that auctions impacted everyone, from electricity auctions affecting household bills to home sales.
“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”, added the Royal Swedish Academy of Sciences added in a press release.
It was further said, “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 analyzed 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.
Upon receiving the news Dr Wilson said: “We’re very glad about it.”
When the journalists questioned the winner, what was the last thing he himself bought at auction, he replied, “I’ve never actively participated in an auction personally.”
However, he included that search engine adverts were often sold at auctions, and said that his had purchased ski boots on eBay.
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