Two American professors have been awarded the Nobel Prize for economic sciences for their work on how auctions function, a field that affects everything from high-end art prices to consumers' electricity bills.
Paul R. Milgrom and Robert B. Wilson were honored “for improvements to auction theory and inventions of new auction formats," Secretary General Göran Hansson of the Royal Swedish Academy of Sciences said during the announcement in Stockholm on Monday.
Milgrom and Wilson's discoveries have "benefitted sellers, buyers and taxpayers around the world," the prize committee added in a statement.
Milgrom is a professor of humanities and sciences at the Stanford University economics department, and Wilson is a professor emeritus of management at the Stanford Business School.
Milgrom's work included the analysis of bidding strategies to determine how the format of an auction can give the seller higher expected revenue as bidders gauge the private value others place on the item on sale.
Wilson's work led to the theory of a common value, which is the best estimate of what an item is worth that bidders then try to set their offers below to avoid overpaying.
Together, they created new auction formats to sell many interrelated items simultaneously, the committee said. In practice, this was adopted by American authorities in 1994 as a method to sell radio frequencies to telecom operators.
Wilson told the press conference by phone of “never actively participating in an auction, personally.” He then clarified that his wife told him that they have bought ski boots on the online auction website eBay.
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Since their contributions to the field in the 1990s, the internet has had a "profound" impact on auctions with the rise of websites like eBay, Wilson said.
The European Union has even used their theories and methodology to auction emission allowances to mitigate climate change.
The prize, called the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, is the last of the Nobel awards to be announced this year. Last week, five Americans were among the Laureates to receive prizes in medicine, physics, chemistry and literature.
The coveted Nobel Peace Prize was awarded Friday to the United Nations World Food Program for its efforts to combat hunger and food insecurity around the globe.
The economics prize has been given to 84 individuals between 1969 and 2019. Only two women have been recipients to date.
Laureates are presented with a Nobel diploma and medal, and share the prize money of 10 million Swedish kronor (more than $1.1 million).