Nobel Economics Prize winners 2020: Paul R. Milgrom and Robert B. Wilson

Nobel Economics Prize winners 2020: Paul R. Milgrom and Robert B. Wilson

Tommy Andersson, member in The Prize Committee for the Alfred Nobel Memorial Prize in Economic Sciences speaks at the Royal Swedish Academy of Sciences in Stockholm on October 12, 2020.

U.S. economists Paul Milgrom and Robert Wilson have won the Nobel Economics Prize 2020 for work on commercial auctions, including for goods and services hard to sell in traditional ways such as radio frequencies, the Nobel Committee said.

It added that authorities in the USA and other countries had used an auction format designed by the pair to sell radio frequencies to telecoms operators since the 1990s.

Their auction formats have been used to sell radio frequencies, fishing quotas and airport landing slots.

Wilson, who was born in 1937 in Geneva, demonstrated why rational bidders tend to place bids below their own best estimate of the common value, because they're anxious about the so-called winner's curse, which describes the phenomenon of paying more than something's actually worth.

"Auctions are tremendously important", Peter Fredriksson, the chair of the Nobel economics committee, said at the announcement ceremony in Stockholm. By using Milgrom and Wilson's auction format, created to counter the problems of uncertain values and the winner's curse, the new FCC spectrum auctions drove billions of dollars in sales over the next twenty years.

"(Bidders) are anxious about the winner's curse - that is, about paying too much and losing out", the committee said.

Their theoretical discoveries have improved auctions in practice.

"This year's Laureates, Paul Milgrom and Robert Wilson, have studied how auctions work".

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The prestigious award comes with a 10-million krona ($1.1 million) cash prize and a gold medal.

Speaking to reporters by telephone, Wilson welcomed the "happy news" of the award and revealed that his own personal experience of auction participation was limited. "I guess that was an auction". He then clarified that his wife told him that they have bought ski boots on the online auction website eBay.

Professor Milgrom complemented that with theories on "private values", when the perceived value of something differed from bidder to bidder.

"For example, if you were if you were bidding for oil on some tract and you don't know how much oil is down there".

Tuesday's prize for Physics honoured breakthroughs in understanding the mysteries of cosmic black holes.

Women have been more prevalent than usual this year, with American poet Louise Gluck winning the literature prize.

The economics prize, won by such luminaries as Paul Krugman and Milton Friedman in the past, was the final of the six awards in 2020, a year in which the Nobels have been overshadowed by the Covid-19 pandemic.

The Rethinking Economics charity, which pushes for a broader application of economics, said it was "disappointing" that the prize had gone to "two white men from the global north working on auction theory".

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