US economists Paul Milgrom and Robert Wilson received the Nobel Prize...

US scientists Paul Milgrom and Robert Wilson received the 2020 Nobel Prize in Economics for their work on auctions, which will benefit buyers and sellers around the world.

The findings of the two economists at Stanford University include an explanation of how bidders try to avoid what is known as the “winner’s curse” of overpayment, and what happens when bidders better understand the value of their competitors.

“Auctions are everywhere and influence our everyday lives,” says the official website of the Nobel Prize.

“This year’s economics winners, Paul Milgrom and Robert Wilson, improved auction theory and invented new auction formats that benefit sellers, buyers and taxpayers around the world.”

Professors Milgrom and Wilson specifically developed formats for the simultaneous sale of related items.

In 1994 the US authorities used one of their auction designs to sell radio frequencies to telecommunications operators, a move that has since been copied in other countries.

Professor Wilson showed that rational bidders tended to place bids below their own best guess of what he called “shared value” – that is, when the value of an item was considered the same for all – for fear of too much numbers.

Professor Milgrom supplemented this with theories of “private value” when the perceived value of something varied from bidder to bidder.

He demonstrated that an auction format would bring the seller higher expected returns if bidders learned more about each other’s estimated values ​​during the bidding process.

Speaking to reporters over the phone, Professor Wilson welcomed the “good news” of the award and revealed that his personal experience of participating in auctions has been limited.

Reuters