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Nobel Prize in Economics 2020 goes to American economists Paul Milgrom and Robert Wilson

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Both the winners are currently affiliated to the Stanford University, Stanford, CA. Their contribution to the field has improved auctions in practice.

Nobel Prize in Economics 2020 goes to American economists Paul Milgrom and Robert Wilson
American economists Paul Milgrom and Robert Wilson won the 2020 Nobel Economics Prize for improvement of the auction theory and invention of new auction formats, the Royal Swedish Academy of Sciences said on Monday (October 12).
"The new auction formats are a beautiful example of how basic research can subsequently generate inventions that benefit society," the academy said in a statement.
Both the winners are currently affiliated to the Stanford University, Stanford, CA. Their contribution to the field has improved auctions in practice.
Their insights have been used to design new auction formats for goods and services that are difficult to sell in a traditional way, such as radio frequencies. Their discoveries have benefitted stakeholders from around the world.
Using auction theory laid out by the award winners, researchers try to understand the outcomes of different rules for bidding and final prices, the auction format. The analysis is complicated since the bidders behave strategically on the information available to them. They take into consideration what they know themselves and what they believe other bidders to know.
Wilson developed a theory for auctions for objects having standard value, a value which is uncertain beforehand, but in the end, it has the same value for everyone.
For example, the future value of radio frequencies or the volume of minerals in a particular area. Wilson showed rational bidders place bids below their best estimate of the common value because they are worried about the winner's curse - that is, about paying too much and losing out.
Milgrom's theory allows not only common values but also private values that vary from bidder to bidder. He analyzed the bidding strategies in various 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.
The 10-million-Swedish-crown ($1.14 million) economics prize is not one of the original five awards created in the 1895 will of industrialist and dynamite inventor Alfred Nobel, but was established by Sweden's central bank and first awarded in 1969.
(With inputs from agencies)
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