The Royal Swedish Academy of Sciences has decided to confer the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel to Stanford University professors Paul R Milgrom and Robert B Wilson "for improvements to auction theory and inventions of new auction formats".
Paul R Milgrom and Robert B Wilson analysed how auctions work by using "their insights to design new auction formats for goods and services that are difficult to sell in a traditional way, such as radio frequencies. "
Using the auction theory, the researchers try to understand the results of different rules of bidding and final prices. This analysis is difficult since bidders behave in a very strategic manner based on available information.
Robert Wilson developed the theory for auctions of objects having a common value, i.e., a value which is uncertain beforehand but is the same for everyone at the end whereas Paul Milgrom formulated a more general theory that not only covers common values but also private values that differ from bidder to bidder.
While presenting the Prize to both the winners virtually, Peter Frederiksson, chair of the Prize Committee stated, "This year's Laureates in Economic Sciences started out with fundamental theory and later used their results in practical applications, which have spread globally. Their discoveries are of great benefit to the society."
The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel has been awarded to 84 laureates since its institution in 1969. Economist couple Abhijit Banerjee and Esther Duflo won the prize in 2019.