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American economists awarded Nobel Prize in economics for work on public sale principle

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Tommy Andersson, member in The Prize Committee for the Alfred Nobel Memorial Prize in Economic Sciences speaks during the announcement of the winners of the “2020 Nobel Prize Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel” at the Royal Swedish Academy of Sciences in Stockholm on October 12, 2020. – US economists Paul Milgrom and Robert Wilson won the Nobel Economics Prize for work on commercial auctions, including for goods and services difficult to sell in traditional ways such as radio frequencies, the Nobel Committee said.

ANDERS WIKLUND/TT News Agency/AFP via Getty Images

The 2020 Nobel Prize in Economic Sciences has been awarded to Paul R. Milgrom and Robert B. Wilson for work on commercial auctions.

The American economists were commended for their “improvements to auction theory and invention of new auction formats,” the committee said.

Milgrom, 72, is the Shirley and Leonard Ely professor of humanities and sciences at Stanford University. Wilson, 83, is the Adams distinguished professor of management, Emeritus at Stanford.

The Nobel Committee said that their discoveries have “benefitted sellers, buyers and taxpayers around the world.”

The two Americans developed auction formats for goods and services that are difficult to sell in a traditional way, such as radio frequencies or the volume of minerals in a particular area.

Wilson developed a theory for auctions of objects with a common value, the Committee said. “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,” the Committee said as the prize was awarded Monday.

“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,” they said.

Last year’s winners of the prize were MIT Professors Abhijit Banerjee and Esther Duflo and Harvard Economist Michael Kremer for “their experimental approach to alleviating global poverty.”

The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel has been awarded 51 times to 84 Laureates between 1969 and 2019.

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Katherine Clark