Two Americans have won the 2020 Nobel Prize in Economics for their groundbreaking research that has helped explain how auctions work and why bidders can behave in strange and unusual ways. In its Monday morning announcement, the Nobel committee said the pair had “used their theoretical discoveries to invent entirely new auction formats for the sale of goods and services.” Robert Wilson’s work helped explain that fear of the “winner’s curse,” or a bidder paying way over other bidders’ estimated value of an item, can lead to bidders placing bids well below their own best estimate of that item’s value. Paul Milgrom discovered a more general theory of auctions that showed sellers return higher than expected revenue when bidders learn more about each other’s estimated values during bidding. Both economists work at Stanford University.
