Abstract
This year’s Nobel Prize in Economic Sciences went to Paul MILGROM and Robert WILSON “for improvements to auction theory and inventions of new auction formats” —  to quote the Prize committee. Why do auctions matter? — Because auctions are everywhere, and they are behind the sale of all sorts of things from everyday goods (eBay), Leonardo da Vinci’s mysterious masterpiece (Christie’s), to billion-dollar worth of online advertising slots (Google) and public properties like lands, treasury bonds, and radio spectrum frequencies. Milgrom and Wilson have made groundbreaking contributions to developing auction theory. Most prominently, they identified the paradoxical “Winner’s Curse” in auctions, analyzed how the Curse could affect an auction’s performance, and proposed ways to alleviate or even lift the Curse. Going beyond pure theory, Milgrom and Wilson have also made significant contributions to improving auctions in the real world. Most remarkably, they designed the Simultaneous Multiple Round Auction for the US Federal Communications Commission's to sell radio spectrum frequencies. Their design worked so well that the spectrum auctions generated some $78 billion for the US government in 1994-2012, far beyond the initial estimates.