2 Stanford economists win Nobel prize for auction theory
STOCKHOLM (AP) - Two American economists received the Nobel Prize on Monday for improving the way auctions work and inventing new and better auction formats that are now woven into many parts of the economy, including one that revolutionized the telecommunications industry.
The discoveries of Paul R. Milgrom and Robert B. Wilson "have helped sellers, buyers and taxpayers around the world," said the Nobel Committee, noting that the auction formats developed by the winners were used for the sale of radio frequencies, electricity and fisheries were quotas and landing sites at the airport.
Both economists are based at Stanford University, where their work is set to shape the entire modern telecommunications industry after developing a new format for the US Federal Communications Commission's radio spectrum auctions in 1994. This format has since been copied for dozens of people and adapted to auctions valued at hundreds of billions of dollars worldwide.
Milgrom, who was reached by phone at his California home, said he had "strangely" received news of their victory.
"I knocked on my door from Bob Wilson," he told The Associated Press. "He was my Ph.D. Advisor, and he lives across the street from me. "
Milgrom said students, friends, and coworkers have long suggested that he and Wilson could be due for the award.
"Actually, it's really cute," he said. "It's nice to have their respect, but also their affection."
Technically known as the Sveriges Riksbank Prize in Economics in memory of Alfred Nobel, the prize was launched in 1969 and is now widely recognized as one of the Nobel Prizes. The winners were announced in Stockholm by Goran Hansson, Secretary General of the Royal Swedish Academy of Sciences.
The committee said Wilson's work showed "why rational bidders tend to place bids below their own best estimate of common value."
"(Bidders) are concerned about the winner's curse - that is, overpaying and losing," the committee said.
One of the problems the two were trying to solve was the "snake in the grass" strategy, said Wilson. This involves a company keeping its interest in the item sold secret for most of the auction and then submitting the winning bid at the last minute.
"It's like an eBay auction," Wilson told the AP. "We had to develop rules that restricted this type of activity at the time."
This included forcing bidders to reveal their interest earlier, he said.
Wilson said his interest in auction theory dates back to the 1950s and he thinks the time to win a Nobel Prize is past.
Wilson spoke to reporters in Stockholm by phone after learning of his victory and tried to think of an auction in which he himself had participated. Then he added, "My wife advises me that we bought ski boots on eBay."
The 83-year-old described his former student as "some kind of genius behind all this auction work".
72-year-old Milgrom developed a more general auction theory that takes into account the so-called “private value” of the sale, which can vary widely from bidder to bidder.
The Americans played a prominent role among this year's Nobel Prize winners. Aside from the Peace Prize, which went to the United States' World Food Program, seven of the eleven winners were American.
"There was huge investment in research and higher education in the United States after World War II, and that paid off across all sciences," Hansson said. "And we'll see how this trend can change in the future."
Last year's award went to two researchers from the Massachusetts Institute of Technology and a third from Harvard University for their groundbreaking research on efforts to reduce global poverty.
Few economists could have predicted last fall that the globe would practically come to a standstill within months as governments closed their borders, imposed lockdowns and ordered other measures to stop the spread of COVID-19 from happening around the world led to a sharp decline in business.
Wilson said that given the ongoing pandemic, he had no immediate plans of what to do with his share of the award-associated cash prize of 10 million crowns ($ 1.1 million) and a gold medal.
"There's not much I can use for travel or anything," he told reporters on the phone from Stanford. "I probably just save it for my wife, my kids."
Last week the Nobel Committee awarded the Physiology and Medicine Prize for the discovery of the liver-damaging hepatitis C virus. The Physics Prize recognized breakthroughs in understanding the secrets of cosmic black holes, and the Chemistry Prize went to scientists behind a powerful gene-editing tool.
The literary prize was awarded to the American poet Louise Glück for her “open and uncompromising” work. The World Food Program received the Nobel Peace Prize for its efforts to combat hunger around the world.
Jordans reported from Berlin. Associate press writer Desiree Seals of Smyrna, Georgia and David Runk of Grosse Pointe Farms, Michigan contributed to this report.
For more articles on The Associated Press past and present Nobel Prizes, please visit https://www.apnews.com/NobelPrizes
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