American duo wins Nobel Economics Prize

Published October 13, 2020
In this October 12 photo provided by Stanford University, Robert Wilson, left, and Paul Milgrom wear masks as they stand for a photo in Stanford, Calif. — AP
In this October 12 photo provided by Stanford University, Robert Wilson, left, and Paul Milgrom wear masks as they stand for a photo in Stanford, Calif. — AP

STOCKHOLM: US economists Paul Milgrom and Robert Wilson won the Nobel Economics Prize on Monday for work on commercial auctions, including for goods and services difficult to sell in traditional ways such as radio frequencies, the Nobel Committee said.

The duo was honoured “for improvements to auction theory and inventions of new auction formats,” the jury said. The Royal Swedish Academy of Sciences noted that the discoveries by Milgrom, 72, and Wilson, 83, “have benefitted sellers, buyers and taxpayers around the world”, it said in a statement.

“Auctions affect all of us at every level. Moreover, they are becoming increasingly common and increasingly complicated,” the academy said, listing examples such as flexible electricity prices set by daily auctions and countries raising funds through government bond auctions.

Wilson, a professor at Stanford in the US, was spotlighted for developing a theory on auctions focusing on a common value, such as the future value of radio frequencies, or the rights to extract minerals in a particular area.

This common value “is uncertain beforehand but, in the end, is the same for everyone”, according to the academy.

Wilson’s work, which resulted in three influential papers in the 1960s and 1970s, showed why bidders tended to bid under what they actually thought the good was worth.

The answer was that they feared the “winner’s curse”, or winning the auction but paying too much.

Milgrom then came up with a more general theory of auctions by analysing bidding strategies in different auction forms, publishing his seminal papers around 1980.

Also a professor at Stan­ford, Milgrom and Wilson live on the same street.

The academy noted that while “people have always sold things to the highest bidder,” societies have also had to allocate “ever more complex objects... such as landing slots and radio frequencies” among users.

“In response, Milgrom and Wilson invented new formats for auctioning off many interrelated objects simultaneously, on behalf of a seller motivated by broad societal benefit rather than maximal revenue,” the academy said.

Their theories were put into practice by US authorities in 1994 to sell radio frequencies to telecom operators, and are applied by governments around the world in the current rollout of 5G networks. The winners will share the prize sum of 10 million Swedish kronor (about $1.1 million, 950,000 euros).

Published in Dawn, October 13th, 2020

Opinion

Revamping the ecosystem

Revamping the ecosystem

Key to high-quality performance of public sector institutions lies in attracting, retaining and motivating civil servants of high calibre throughout the system.

Editorial

Rain havoc
Updated 19 Jul, 2025

Rain havoc

Thursday’s events must be seen not as an isolated disaster, but as a warning of what lies ahead.
Shattered Strip
19 Jul, 2025

Shattered Strip

THE Gaza siege has now crossed 650 days and the situation continues to take one ugly turn after another. True, even...
Battling drugs
19 Jul, 2025

Battling drugs

PAKISTAN’s war on drug trafficking has been ongoing for several years. But the country remains awash in the ...
Soaring again
Updated 18 Jul, 2025

Soaring again

The lifting of the ban by the UK will lead to several welcome developments.
Terror in Kalat
18 Jul, 2025

Terror in Kalat

THE unrest in Balochistan is increasingly taking on an ugly and dangerous colour, with repeated, indiscriminate...
Economic exclusion
18 Jul, 2025

Economic exclusion

FOR all the progress made in Pakistan towards the inclusion of women across the sociopolitical divide, comprehensive...