US's Paul Milgrom, Robert Wilson Get Nobel Prize in Economics

The 2020 Nobel Prize in Economic Sciences was on Monday awarded to US economists Paul R Milgrom and Robert B Wilson for their work on auction theory and invention of new auction formats, benefitting sellers, buyers and taxpayers around the world.

“The Royal Swedish Academy of Sciences has decided to award the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2020 to Paul R Milgrom, Stanford University, US and Robert B Wilson, Stanford University, US, for improvements to auction theory and inventions of new auction formats”, the academy said in a statement. Their theoretical discoveries have improved auctions in practice.

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. He 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 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. "The duo of academics--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. In 1994, the US authorities first used one of their auction formats to sell radio frequencies to telecom operators. Since then, many other countries have followed suit," the statement further added. "This year’s Laureates in Economic Sciences started out with fundamental theory and later used their results in practical applications, which have spread globally. Their discoveries are of great benefit to the society," Peter Fredriksson, chair of the Prize Committee said.

Born in 1948 in Detroit, Milgrom received his doctorate in 1979 from Stanford University. He is a professor in the same university. Wilson, born in 1937 in Geneva, US, educated from Harvard University, Cambridge, US. Now, Mr Wilson is professor of Management at Stanford University. According to a release, the prize money 10 million Swedish kronor, will be shared equally between the Laureates. Last year, Indian-American economist Abhijit Banerjee and Esther Duflo, both of MIT, and Michael Kremer of Harvard were honored for more than 20 years of economic research to develop new ways to study and help in alleviating global poverty.