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Nobel Prize in Economic Sciences awarded to Milgrom and Wilson for auction theory research

Published: 15th October 2020 Last updated: 15th October 2020

Two American researchers, Paul R. Milgrom and Robert B. Wilson, have been awarded the Nobel Prize in Economic Sciences for their pioneering work in auction theory.

Auction theory research aims to understand how people act at auctions. The two laureates have 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, fish quotas, aircraft landing slots, and emissions allowances. ‘Their discoveries have benefitted sellers, buyers and taxpayers around the world’, according to the Royal Swedish Academy of Sciences.

Paul Milgrom

Some years ago, Paul R. Milgrom attended a seminar in Tilburg to present and explain his latest auction format. This format was used in the US to first buy frequencies used for TV broadcasting and subsequently sell them to providers of 5G mobile communications and “the Internet of Things”.

At TiSEM Professors Frank de Jong and Eric van Damme are amongst those who study auctions. Most relevant to De Jong’s academic interests is a phenomenon that frequently occurs in the financial markets. Like Milgrom he focuses on the same stock being bought and sold at different prices, even if there is very little time between buying and selling. This is related to what are called information asymmetries: transaction initiators generally know more than random market actors. Frank studies how stock exchange brokers, such as high frequency traders, have to deal with asymmetric information.

Robert Wilson

Eric van Damme’s research pursuits include game theory, auction theory, competition, regulation, and economics. He has known Wilson since he obtained his PhD in 1983. Wilson has frequently reviewed and cited his work. Van Damme believes it is a clear case of giving honor where honor is due. ‘Several of his former PhD students are Nobel laureates. It was about time he was given the same recognition.’

Illustraties: © Nobel Media / Niklas Elmehed