As reported on October 12, 2020, US economists Paul Milgrom (72) and Robert Wilson (83) won the Nobel Economics Prize 2020, for their work on commercial auctions, including for goods and services difficult to sell in traditional ways such as radio frequencies. As per the jury, they were honoured for improvements to auction theory and inventions of new auction formats. They will share the prize sum of about US$ 1.1 million.
Mr. Wilson’s work showed why rational bidders tend to bid under their own estimate of the worth, due to worries over the ‘winner’s curse,’ or winning the auction but paying too much. A professor at Stanford in the U.S., had developed a theory for auctions with a common value, which is uncertain beforehand.
Mr. Milgrom, also from Stanford, came up with a more general theory of auctions by analysing bidding strategies in different auction forms. While ‘people have always sold things to the highest bidder,’ societies have also had to allocate ‘ever more complex objects… such as landing slots and radio frequencies.’ These economists 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 Nobel Prize in Economic Sciences was established in 1968 by a donation from Sweden’s central bank Sveriges Riksbank to the Nobel Foundation to commemorate the bank’s 300th anniversary. It is not a Nobel Prize because it is not one of the prizes that Alfred Nobel established in his will in 1895. However, it is administered and referred to along with the Nobel Prizes by the Nobel Foundation. Laureates are announced with the Nobel Prize laureates, who receive the award at the same ceremony. They are selected by the Royal Swedish Academy of Sciences.
Courtesy: The Hindu