The 2020 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel has been awarded to Paul R. Milgrom and Robert B. Wilson “for improvements to auction theory and inventions of new auction formats,” the Nobel Prize announced on Twitter.
The two American economists are considered experts in “game theory” modelling of strategic interactions. Both have made contributions to the “auction theory” branch of game theory in economics, studying the behavior of participants in auction markets and bidding strategies.
Wilson’s research demonstrated why rational bidders tend to place bids below their own estimate of the item’s actual value – a reflection of their fear for what economists call the “winner’s curse”.
Milgrom’s version of auction theory formulates that along with a common estimated value shared by bidders, participants in auctions also are influenced by private values, which differ from one bidder to the next.
Together, the work of Milgrom and Wilson has both clarified how auctions work, but also led to the creation of new forms of auctions.