U.S. academics Paul R. Milgrom and Robert B. Wilson shared the Nobel Prize in Economic Sciences for new insights into how auctions work, and how different auction designs can help buyers and sellers meet their goals.
The announcement Monday gave the U.S. a clean sweep of this year’s Nobel Prizes, with at least one American citizen winning in each of the five categories for which individuals were selected.
“There has been an enormous investment in research in the U.S., and that has paid off,” said Göran K. Hansson, secretary-general of the Royal Swedish Academy of Sciences, which awards the prizes.
Auctions play a big part in setting the price of many of the goods and services people use every day, although their reach isn’t always appreciated, even by those who have spent decades studying them.
In a news conference announcing the prize, Dr. Wilson initially declared that he had never taken part in an auction explicitly, before being reminded that wasn’t the case.
“My wife points out to me that we bought ski-boots on eBay, and I guess that’s an auction,” he told reporters.
The internet has helped make auctions even more pervasive in daily life, but the breakthroughs for which the prize was awarded predate its arrival.
The application of the insights and new designs developed by Drs. Milgrom and Wilson have been particularly significant for allocating public goods, such as radio spectrum, fishing quotas and airport landing slots.
While governments and taxpayers want to maximize their revenues from selling those goods, the danger is that they will be too successful, and force the winner to pay so much that delivery of the associated service—such as mobile phone connections, or flights—is impaired. Understanding how auction formats match complex objectives helps avoid such outcomes.
Their theory has benefited “buyers sellers, taxpayers, end users and society as a whole,” said Tommy Andersson, a member of the Nobel Economics Committee.
Both winners are professors at Stanford University and in their 70s. Dr. Milgrom was born in Detroit, while Dr. Wilson was born in Geneva, New England.
Last year’s award went to three economists for their experimental work testing ways to improve education or health in the developing world or to address some of the other problems affecting the very poor.
Write to Paul Hannon at [email protected]
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