The Perfect Auction: 2020 Prize in Economic Sciences

Today, the Royal Swedish Academy of Sciences has announced their decision to award the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2020 to Paul R. Milgrom and Robert B. Wilson “for improvements to auction theory and inventions of new auction formats.”

From the popular science background of the Royal Swedish Academy of Sciences:

“Every day, auctions distribute astronomical values between buyers and sellers. This year’s Laureates, Paul Milgrom and Robert Wilson, have improved auction theory and invented new auction formats, benefitting sellers, buyers and taxpayers around the world.

Auctions have a long history. In Ancient Rome, lenders used auctions to sell the assets they had confiscated from borrowers who were unable to pay their debts. The world’s oldest auction house, Stockholms Auktionsverk, was founded in 1674 – also for the purpose of selling appropriated property.

Nowadays, when we hear the word auction, we perhaps think of traditional farm auctions or high-end art auctions – but it could just as well be about selling something on the internet or buying property via an estate agent. Auction outcomes are also very important for us as taxpayers and as citizens. Often, the companies that manage our home refuse collection have won a public procurement by placing the lowest bid. Flexible electricity prices, which are determined daily in regional electricity auctions, influence the cost of heating our homes. Our mobile phone coverage depends on which radio frequencies the telecom operators have acquired through spectrum auctions. All countries now take loans by selling government bonds in auctions. The purpose of the European Union’s auction of emission allowances is to mitigate global warming.

So, auctions affect all of us at every level. Moreover, they are becoming increasingly common and increasingly complicated. This is where this year’s Laureates have made major contributions. They have not just clarified how auctions work and why bidders behave in a certain way, but used their theoretical discoveries to invent entirely new auction formats for the sale of goods and services. These new auctions have spread widely around the world.”

Find further information here.