Researchers at auctions receive the Nobel Prize in Economics – E24

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It became apparent during a press conference in Stockholm on Monday. They both receive the award for having studied how auctions work.

The winners have also used their knowledge to design new auction formats for goods and services that are difficult to sell in the traditional way, such as radio frequencies, says a message from the Royal Academy of Sciences, which formally presents the award.

The president of the awards committee, Peter Fredriksson, stressed during the press conference that the auctions are “of enormous importance”.

– They generate astronomical sums every day between buyers and sellers. They affect us all, perhaps more than we think. You probably bought your home at auction. When auctions are that important, it’s important that they’re done the right way, Fredriksson said.

That’s why they win

Robert Wilson is singled out by the committee as the developer of the common value auction theory. This is, for example, the future value of radio frequencies or the volume of minerals in a particular area.

“Wilson showed why rational bidders are used to bidding below their best estimates of common value: they were concerned about the winner’s curse, which is to pay too much and lose,” the Royal Academy of Sciences wrote in a statement.

Paul Milgrom, for his part, stands out for having formulated a more general theory around auctions that does not include objects with a common value, but also private values ​​that vary from bidder to bidder.

“He analyzed the bidding strategies in several well-known auction formats and demonstrated that one format will give the seller a higher expected income when bidders learn more about the estimated valuation of others through bidding,” the report states.

Three Norwegians have won

Formally, the award under the name of the Sveriges Riksbank Prize in Economic Sciences is in memory of Alfred Nobel. The award was first awarded in 1969 and is not part of Alfred Nobel’s will. This has led to various discussions over the years about the name of the award.

The first prize that was awarded went to the Norwegian Ragnar Frisch, who received the award together with the Dutchman Jan Tinbergen. Later, Trygve Haavelmo and Finn Kydland also received the economics award.

Over the years, only two women have had the honor of receiving the award. The first time was when Elinor Ostrom received the award in 2009. Esther Duflo received the award last year as the second woman. Duflo was 46 years old when she received the award, which also makes her the youngest winner in history.

Prize winners share a sum of SEK 10 million. That’s all the winners of the other Nobel prizes get.