The Prize in Economic Sciences 2020
This year’s Laureates, Paul Milgrom and Robert Wilson 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 benefit ted sellers, buyers and taxpayers around the world.
People have always sold things to the highest bidder, or bought them from whoever makes the cheapest offer. Nowadays, objects worth astronomical sums of money change hands every day in auctions, not only household objects, art and antiquities, but also securities, minerals and energy.
Public procurement can also be conducted as auctions.Using auction theory, researchers try to understand the outcomes of different rules for bidding and final prices, the auction format. The analysis is difficult, because bidders behave strategically, based on the available information. They take into consideration both what they know themselves and what they believe other bidders to know.