This year the Nobel Prize in the field of economics has been given to Paul R. Milgrom and Robert B. Wilson. The Nobel Prize Committee on Monday announced the sixth and final award winners of this year. Milgrom and Wilson have been awarded this award for improving auction theory (auction theory) and inventing new methods of auction.
Paul R. Milgrom and Robert B. Wilson both work at Stanford University in the United States. They studied how the auction process works. They created new auction formats for goods and services (such as radio frequencies) that are difficult to sell in the traditional way. His discoveries have benefited sellers, buyers and taxpayers around the world.Using auction theory or auction theory, researchers try to understand the consequences of different rules for bidding and final prices. This analysis is difficult, because bidders conduct strategic behavior based on available information. They keep both sides in mind what they themselves know and what the other bidders know according to them.
Wilson developed the theory for the auction of a common value item. Accordingly, a value that is already uncertain but at the end remains the same for all. Wilson showed through his theory why rational bidders place bids below their best estimate of their normal value. They are concerned about the loss of being the winner. That is, they are worried about overpaying and the loss due to it.
Milgrom formulated a general principle of auction that not only allowed normal values, but also private values. This private value bid varies for each bidder. He analyzed bidding strategies in several well-known auction formats. Which showed that when people get more information about each other’s estimated prices when bidding, a format gives the seller higher expected revenue.