US economists Paul R Milgrom and Robert B Wilson of Stanford University were awarded the 2020 Nobel Prize in Economic Sciences for their research into auction theory, the Royal Swedish Academy of Sciences said on Monday.
"Paul Milgrom and Robert Wilson have improved auction theory and invented new auction formats, benefiting sellers, buyers and taxpayers around the world," the academy said.
Peter Fredriksson, chair of the prize committee, said the research conducted by the two was essential because "auctions are tremendously important. Everyday they allocate astronomical values between buyers and sellers."
Auctions are used to buy and sell a variety of goods and services, including electricity, financial assets, fishing quotas and carbon emissions allowances.
The prize committee noted that in 1994, US authorities first used one of the auction formats designed by Milgrom and Wilson to sell radio frequencies to telecom operators.
"The design of the auction is crucial," said Ingrid Werner, member of the committee and professor of finance at Ohio State University in the United States.
The two laureates understood that "most goods and services sold do not just have a private value but also have a value beyond the individual," she told.
Private individuals sell items at online auctions to get "the maximum amount of money for the item" they are selling, Werner said. "But the government has broader objectives."
In the case of allocating radio frequencies, that objective was not necessarily maximum profit but a "service provision that is adequate for the consumers," Werner said, adding "that makes the problem super complicated."
Reacting to the announcement, Wilson said being named co-winner was "very happy news."
Ski boots bought on auction
He told reporters he planned to save his 10-million-kronor (around 958,000 euros) cash prize for his wife and children, as travel was difficult during the pandemic.
When asked what he had recently bought at auction, he said he was not very active. "My wife points out to me that we bought ski boots on eBay, so I guess that was an auction," he added.
Last year, a trio of US-based economists - Abhijit Banerjee, Esther Duflo and Michael Kremer - were awarded the Nobel prize for their work on alleviating global poverty.
US economists have predominately been given the economics award. Only two women, Elinor Ostrom of the US and French-born Esther Duflo, have won to date.
Monday's disclosure completed the annual Nobel prize announcements, after the awards for medicine, physics, chemistry, literature and peace were communicated last week.
With the exception of economics, the prizes were all endowed by Swedish industrialist Alfred Nobel (1833-96), the inventor of dynamite.
Organizers have said that this year's award ceremonies - traditionally held on 10 December, the anniversary of Nobel's death - have been scaled down due to the coronavirus pandemic.
The economics prize, which was not one of the original prizes mentioned in Nobel's will, is formally called the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. It was set up and funded by the Swedish central bank and first awarded in 1969.