Robert Wilson and Paul Milgrom share the Sveriges Riksbank Prize in Economics in memory of Alfred Nobel for their work on auctions
Today’s announcement is a double victory for Stanford, as Paul Milgrom and Robert Wilson are based there
This year’s winners Paul Milgrom and Robert Wilson studied how auctions work.They also used their knowledge to design new auction formats for goods and services that are difficult to sell in the traditional way, such as radio frequencies Their findings have benefited sellers, buyers and taxpayers around the world
People have always sold things to the highest bidder, or bought them from whoever makes the cheapest bid Nowadays, things worth astronomical sums change hands every day at auctions, no. only household items, art and antiques, but also values, minerals and energy Public contracts can also be carried out in the form of auctions
Using auction theory, researchers try to understand the results of different auction rules and final prices, the auction format Analysis is difficult because bidders behave strategically, depending on the information available They take into consideration both what they themselves know and what they think other bidders know
Robert Wilson developed the theory of auctioning objects of common value – a value that 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 Wilson showed why rational bidders tend to place bids below their own best estimate of common value: they worry about the winner’s curse – i.e. to pay too much and lose
Paul Milgrom formulated a more general auction theory that allows not only common values but also private values that vary from bidder to bidder He analyzed auction strategies in a number of well-known auction formats, demonstrating that one format will give the seller higher expected revenues when bidders learn more about each other’s estimated values during the auction. bid
Over time, companies allocated increasingly complex objects between users, such as landing slots and radio frequencies.In response, 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 maximum income In 1994, US authorities first used one of their auction formats to sell radio frequencies to telecommunications operators. Since then, many other countries have followed suit
“This year’s laureates in economics started with fundamental theory and then used their results in practical applications, which have spread around the world Their findings are of great benefit to society,” says Peter Fredriksson , president of the prize committee
Q: What will you use the cash prize for, now that you’ve already purchased the ski boots?
Robert Wilson replies that he cannot travel much with him during the pandemic [reminder, his share is 5 million crowns, or about $ 560,000]
We have a phrase « You put it in a sock » Save it and wait another time
And that’s the end of the call, so we can let the Wilsons celebrate the win
This has changed “very profoundly”, answers Robert Wilson Thanks to the Internet, auctions are organized continuously by various companies
He cites selling ads on search engines and public auction formats like eBay (those ski boots!)
But he also cites the ‘deep impact’ of financial trading – where there are many places to buy and sell assets, and they are all tightly integrated on the internet. This results in essentially instant trading in the financial markets
Robert Wilson is on a rather fearful phone now (he is based at Stanford University in California, where it is 3 a.m.)
This is very good news, we are very happy about it It is very early in the morning here
Q: What’s the last thing you bought in an auction and what was the biggest problem you solved with an auction?
I’ve never actively participated in an auction personally, Wilson admits with a chuckle, causing laughter in Stockholm as well
But then he points out that we are all auction recipients every day
If you are looking at a search engine ad – that ad was probably auctioned off
This is something you come across a lot, but I’m not a big auction participant myself
My wife points out to me that we bought some ski boots on eBay I guess it was an auction
Not, as you might expect, to sum up 2020 But as an example of how items have private values, as well as common value components
If you plan to bid on a work of art, says the Academy, you might be thinking about resale value, but you would also include your own “private value” In fact, if you want to hang it above from the fireplace
Most auctions have components of private value, as well as common values, and in the early 1980s Paul Milgrom began to analyze them
His research can help rank all standard auction formats based on their expected income And also factors in things we see in practice – like sellers sharing information with bidders
The auction theory developed by Paul Milgrom and Robert Wilson has been instrumental in the design of new and complex auction formats implemented all over the world – to sell radio spectrum, fishing quotas, slots landing at airports and electricity quotas
In the 1960s, Robert Wilson began investigating auctions with a common value – unknown in advance, but which is the same for all bidders, says Academy
This could be a bid for fishing quotas – where the value is determined not only by the quota, but also by the future value of the fish Bidders must estimate this value in order to be able to overpay
Robert Wilson’s research helps explain how rational bidders in common-value auctions should place their bids to maximize their own expected value, while « avoiding being hit by the winner’s curse »
Auctions are everywhere People use auctions to buy and sell items on websites, says Royal Academy
Electricity markets are organized in auctions Financial assets, CO2 emission allowances and radio spectrum are all organized in the form of auctions
Some sellers want to maximize their income, but others have other goals – using auctions as a tool, perhaps to reduce emissions or maximize public value
The auction theory provided by Paul Milgrom and Robert Wilson is essential to understand how these objectives can be achieved
The 2020 Sveriges Riksbank Prize in Economics in Memory of Alfred Nobel has been awarded to Paul R Milgrom and Robert B Wilson
They are recognized for their work on auction theory and the invention of new auction formats
Göran K Hansson, Secretary General of the Royal Academy, says this year’s prize is for auction
Three years ago the economics prize was behavioral economist Richard Thaler, pioneer of the ‘push theory’
Thaler joked that he would spend the 9million crown prize « as irrationally as possible », but he also addressed the encouraging words to those of us who never made it to the top of the class.
I wasn’t a great student My thesis advisor said that in an interview about my time in high school, « we didn’t expect much from him »
« I was not a great student My thesis advisor said: » We weren’t expecting much from him « » – Richard Thaler, 2017 laureate in economics Tomorrow, the recipient (s) of the 2020 des economics will be announced – stay tuned! #NobelPrize picTwittercom / aSKLn4xL0I
Elinor Ostrom was the first woman to receive the prize in economics She received the prize for work on human cooperation, showing how natural resources can be shared sustainably by a community without central authorities or privatization#NobelPrize picTwittercom / HReYXTBacJ
Data analytics company Clarivate also produced a list of economics professors who could win today, based on academic quotes All based in the US, they are:
Swedish news site The Local has rounded up some of the potential Nobel Laureates in economics:
American Claudia Goldin, whose research has focused on inequality and the female workforce, is one of the favorites to become the third woman to receive the award
Another likely candidate is compatriot Anne Krueger, formerly number two, and briefly managing director of the International Monetary Fund (IMF), who has studied rent-seeking and is a free trade activist
The American Paul Milgrom, 72, as well as his compatriot Robert Wilson, 83, are again announced as favorites for their work on commercial auctions
Joshua Angrist, a professor at the Massachusetts Institute of Technology in the United States, has also been nominated for research on the impact of factors such as class size and length of study on academic achievement and the labor market. job
Other pioneers of « natural experiments », like the Canadian David Card, could receive with him the nod of the head
Israeli economist Elhanan Helpman and American Gene Grossman, international trade specialists, are also often cited as favorites
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Economics, Paul Milgrom, Nobel Prize in Economics, Robert B Wilson, Auction Theory
News from the world – GB – Nobel Prize in Economics awarded to Milgrom and Wilson for their work on auction theory – Business Live
