Nobel Prize 2020 in economics awarded to Paul Milgrom and Robert Wilson

_{Nobel Prize 2020 in economics awarded to Paul Milgrom and Robert Wilson. Source: Twitter/The Nobel Prize}

The 2020 Nobel prize in economic science in the memory of Alfred Nobel has been awarded to Paul R. Milgrom and Robert B. Wilson “for improvements to auction theory and inventions of new auction formats.”

The prize for economics is officially known as the Sveriges Riksbank Prize in Economic Sciences. It was established by Sweden’s central bank and has been awarded since 1969 in memory of industrialist Alfred Nobel.

BREAKING NEWS:
The 2020 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel has been awarded to Paul R. Milgrom and Robert B. Wilson “for improvements to auction theory and inventions of new auction formats.”#NobelPrize pic.twitter.com/tBAblj1xf8
— The Nobel Prize (@NobelPrize) October 12, 2020

This year’s Laureates, Paul Milgrom and Robert Wilson, have studied how auctions work. They 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.

Robert Wilson developed the theory for auctions of objects with a common value – a value which is uncertain beforehand but, in the end, is the same for everyone. Examples include the future value of radio frequencies or the volume of minerals in a particular area. 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.

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 analysed 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.

Paul R. Milgrom was born in 1948 in Detroit, USA. He did Ph.D in 1979 from Stanford University, Stanford. Currently, he is Shirley and Leonard Ely Jr. Professor of Humanities and Sciences, Stanford University, USA.

Robert B. Wilson was born 1937 in Geneva, Nebraska, U.SA. He did his BA, MBA, and DBA from Harvard University, Cambridge, USA. Currently, he is Adams Distinguished Professor of Management, Emeritus, Stanford University, USA.

The prestigious award comes with a gold medal and prize money of 10 million krona (more than $1.1 million) which is to be shared equally between the Laureates.

Announcement of the 2020 Prize in Economic Sciences by Professor Göran K. Hansson, Secretary General of the Royal Swedish Academy of Sciences, on 12 October 2020.