Abstract
The 2020 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel was awarded to Paul R. Milgrom and Robert B. Wilson “for improvements to auction theory and inventions of new auction formats”. Maarten C. W. Janssen reflects on Milgrom and Wilson’s work.
Highlights
AUTHOR’S NOTE: The author would like to thank Theo A
Who should have the right to use landing or gate slots at busy airports? Who should have the right to produce electricity at a certain time in a certain country? Who should get the right of using certain spectrum frequencies? How should parking places be allocated in the streets of larger cities? Where should gasoline stations be allocated along highways and who should get the right to exploit these locations? Who should get the right to drill for natural resources in a certain designated area and what conditions do we want to impose on these rights? Who should supply a car manufacturer with windshields? Who should get the right to advertise on an internet page? Or how should we allocate emission permits?
It should be clear that, because of the vast number of potential applications in very different areas, it is important to have a better understanding of how different possible auction formats may work and when they can be applied
Summary
AUTHOR’S NOTE: The author would like to thank Theo A. It may be natural to think that the objective is to generate (or even maximize) revenue; in other contexts, objectives may include fairness, a division of resources over different bidders, or the creation of a competitive market to maximize consumer welfare after the resources are allocated (such as is the case in spectrum auctions). Bidders place a bid below what they think the jar is worth, where the amount they bid less than their value depends (among other things) on how many bidders participate in the auction.
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