Americans Paul Milgrom and Robert Wilson have won the Nobel Prize in Economics for their work on commercial auctions. The Royal Swedish Academy of Sciences said their discoveries have benefited sellers, buyers and taxpayers around the world.
“The auction theory developed by Paul Milgrom and Robert Wilson has been instrumental when designing new and complex auction formats...and implemented all around the world -- to sell radio spectrum, fishing quotas, airport landing slots and electricity allowances,” the Nobel academy said on Monday.
Wilson, 83, a professor at Stanford University in the United States, was spotlighted for developing a theory for auctions with a common value: "A value which is uncertain beforehand but, in the end, is the same for everyone," according to the academy.
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.
Internet major game changer
Wilson told The Guardian that the internet has “profoundly” changed the way auctions are carried out, allowing them to be run on a continual basis by various enterprises.
Milgrom, 72, also at Stanford, came up with a more general theory of auctions, by analysing bidding strategies in different auction forms.
Auctions can be found in many sectors, including for adverts on search engines, public auction formats like eBay, financial assets and CO2 emissions allowances.
Wilson also cites the “profound impact” in financial trading -- where there are many venues to buy and sell assets, all tightly integrated over the Internet.
Milgrom and Wilson will share the prize sum of 10 million Swedish krona (950,000 euros).
Last year the prize went to French-American Esther Duflo, Indian-born Abhijit Banerjee of the US, and American Michael Kremer for their experimental work on alleviating poverty.
The 'false Nobel'
While it may be the most prestigious prize an economist can hope to receive, the Nobel economics prize does not enjoy the same status as those originally chosen by Alfred Nobel in his will, which included medicine, physics, chemistry, literature and peace.
It was instead created through a donation from the Swedish central bank, which lead detractors to dub it a "false Nobel."
The prize closes the 2020 Nobel season, which saw the peace prize awarded to the UN's World Food Programme.
Women were more prevalent than usual this year. American poet Louise Gluck won the literature prize, and France's Emmanuelle Charpentier and American Jennifer Doudna became the first female duo to win a science Nobel, clinching the chemistry award for their discovery of the CRISPR-Cas9 DNA snipping "scissors".
Winners would normally receive their Nobel from King Carl XVI Gustaf at a formal ceremony in Stockholm on 10 December, but the Covid-19 pandemic has seen it replaced by a televised ceremony with the laureates receiving their awards in their home countries.