Paul Milgrom and Robert Wilson developed new types of auctions for sale of goods and services
From The Financial Times, October 12, 2020
Paul Milgrom and Robert Wilson, professors at Stanford University, have won this year’s Nobel Prize in economics for their work on auction theory and the design of new auction formats.
The committee awarding the prize — officially known as the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel — said the theory they developed had been instrumental in developing new and complex auction formats now used around the world, for purposes ranging from the sale of radio spectrum to allocating airport landing slots and setting up emissions trading systems.
Auction outcomes matter — for taxpayers as well as private buyers and sellers — because they influence so many aspects of daily life, from the price of electricity or government bonds to the quality of mobile phone coverage and smooth running of refuse collection.
Understanding how auction formats will influence outcomes is difficult, however, because bidders behave strategically, based on both the information they have and on what they believe other bidders know.
The prize committee said the laureates’ work had been “of great benefit to society”, allowing regulators and governments around the world not only to maximise revenues or procure at lowest cost, but also to put activities into the hands of agents best placed to manage them.