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Two Stanford University professors win Nobel Prize for economics for their work on improving auctions and helping 'sellers, buyers and taxpayers around the world'

Two American professors have been awarded the Nobel Prize for economics for improving the theory of how auctions work and inventing new and better auction formats that are now woven into many parts of the economy.  

Paul R. Milgrom, 72, and Robert B. Wilson, 83, were awarded the prestigious prize on Monday as the winners were announced in Stockholm by Goran Hansson, secretary-general of the Royal Swedish Academy of Sciences.

Their discoveries 'have benefitted sellers, buyers and taxpayers around the world,' the Nobel Committee said. 

Their auction formats have been used to sell radio frequencies, fishing quotas and airport landing slots.   

Paul R. MilgromRobert B. Wilson

American economists Paul R. Milgrom, 72, and Robert B. Wilson, 83, were the Nobel Prize in economics for 'improvements to auction theory and inventions of new auction formats.'

Their discoveries 'have benefitted sellers, buyers and taxpayers around the world,' the Nobel Committee said. Their auction formats have been used to sell radio frequencies, fishing quotas and airport landing slots

Their discoveries 'have benefitted sellers, buyers and taxpayers around the world,' the Nobel Committee said. Their auction formats have been used to sell radio frequencies, fishing quotas and airport landing slots 

The European Union has even used their theories and methodology to auction emission allowances to combat climate change.

Milgrom is a professor of humanities and sciences at the Stanford University economics department while Wilson is a professor emeritus of management at Stanford Business School.

Wilson described his former student as 'sort of the genius behind all of this auction work,' noting that they first worked together on auctions in the 1970s.

'We’re really motivated to use theory in a very practical way to improve various economic processes,' Wilson said.

Wilson’s work focused on the theory of common value, the best estimate of what an item is worth that bidders try to bid below it to avoid overpaying.

Milgrom’s work analyzed bidding strategies to determine how the format of an auction can give the seller higher expected revenue as bidders estimate the 'private value' others place on the auction items.  

Together, they created new auction formats that were adopted by American authorities in 1994 to sell radio frequencies to telecom operators.  

Tommy Andersson, a member in The Prize Committee for the Alfred Nobel Memorial Prize in Economic Sciences speaks during the announcement of the winners Monday at the Royal Swedish Academy of Sciences in Stockholm

Tommy Andersson, a member in The Prize Committee for the Alfred Nobel Memorial Prize in Economic Sciences speaks during the announcement of the winners Monday at the Royal Swedish Academy of Sciences in Stockholm

Speaking to reporters in Stockholm by phone after learning of his win, Wilson struggled to think of an auction he himself had participated in. But then added: 'My wife points out to me that we bought ski boots on eBay. I guess that was an auction.'

Technically known as the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, the award was established in 1969 and is now widely considered one of the Nobel prizes.

Last year’s award went to two researchers from the Massachusetts Institute of Technology and a third from Harvard University, for their groundbreaking research into efforts to reduce global poverty. 

The prestigious award comes with a 10 million krona, or $1.1million cash prize and a gold medal. 

The face of the Nobel Prize meda  shows Alfred Nobel, a Swedish chemist, engineer, inventor, businessman, and philanthropist

The face of the Nobel Prize meda  shows Alfred Nobel, a Swedish chemist, engineer, inventor, businessman, and philanthropist

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'There’s not much I can use it for, in terms, you know, travel or something. Probably I’ll just save it for my wife, my children,' Wilson said.

Last week, the Nobel Committee awarded the prize for physiology and medicine for discovering the liver-ravaging hepatitis C virus. 

Tuesday’s prize for physics honored breakthroughs in understanding the mysteries of cosmic black holes, and the chemistry prize on Wednesday went to scientists behind a powerful gene-editing tool.

The literature prize was awarded to American poet Louise Gluck on Thursday for her 'candid and uncompromising' work. The World Food Programme won the Nobel Peace Prize on Friday for its effort to combat hunger worldwide.

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