The winners will equally share a cash prize amount of 10 million Swedish kronor ($1.1 million) and gold medal Credit: © Johan Jarnestad/The Royal Swedish Academy of Sciences

The 2020 Nobel Prize in Economic Sciences was awarded to Paul R Milgrom and Robert B Wilson on Monday for their work on auction theory and invention of new auction formats.

This year’s Laureates, Milgrom and Wilson, both professors at Standford University have studied how auctions work. “They have also used their insights 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 sellers, buyers and taxpayers around the world,” said a release from The Royal Swedish Academy of Sciences.

“Robert Wilson developed the theory for auctions of objects with a common value – a value which is uncertain beforehand but, in the end, is the same for everyone,” said the release, adding, “Wilson showed why rational bidders tend to place bids below their own best estimate of the common value: they are worried about the winner’s curse – that is, about paying too much and losing out.”

Meanwhile, Milgrom formulated a more general theory of auctions that allows not only common values, but also private values that vary from bidder to bidder.

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Peter Fredriksson, chair of the Prize Committee said, “This year’s Laureates in Economic Sciences started with fundamental theory and later used their results in practical applications, which have spread globally. Their discoveries are of great benefit to society.”

The winners will equally share a cash prize amount of 10 million Swedish kronor ($1.1 million) and gold medal.

Last year’s award went to Indian-American economist Abhijit Banerjee, Esther Duflo and Michael Kremer. The trio was awarded for their groundbreaking research into alleviating global poverty.

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