This year’s Economic Sciences Laureates, Paul Milgrom and Robert Wilson, have improved auction theory and invented new auction formats, benefitting sellers, buyers and taxpayers around the world,” the academy said.

The 2020 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel has been awarded to Paul R. Milgrom and Robert B. Wilson “for improvements to auction theory and inventions of new auction formats.”

“Auctions are everywhere and affect our everyday lives. This year’s Economic Sciences Laureates, Paul Milgrom and Robert Wilson, have improved auction theory and invented new auction formats, benefitting sellers, buyers and taxpayers around the world,” the academy said.

Robert Wilson developed the theory for auctions of objects with a common value – a value which is uncertain beforehand but, in the end, is the same for everyone. Mr. Wilson showed why rational bidders tend to place bids below their own best estimate of the common value: they are worried about the winner’s curse – that is, about paying too much and losing out.

Paul Milgrom formulated a more general theory of auctions that not only allows common values, but also private values that vary from bidder to bidder. He analysed the bidding strategies in a number of well-known auction formats, demonstrating that a format will give the seller higher expected revenue when bidders learn more about each other’s estimated values during bidding.

The award caps a week of Nobel Prizes and is technically known as the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. Since its establishment in 1969, it has been awarded 51 times 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 ($1.1 million) cash prize and a gold medal.

On Monday, the Nobel Committee awarded the prize for physiology and medicine for discovering the liver-ravaging hepatitis C virus. Tuesday’s prize for physics honoured 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.