How does auction theory determine the future of the economy?

By |2020-10-16T15:19:55+00:00October 16th, 2020|

Auctions are gradually becoming an increasingly important component of the global economy. They have ceased to be a highly specialized tool suitable only for limited categories of goods - auctions are being used more widely and in new formats. Even the very conservative Nobel Committee acknowledged this trend. As well as the Bank of Sweden, which finances the prize and awards the Nobel memorial prize in Economics. In 2020, it will be awarded to Paul Milgrom and Robert Wilson for “improving auction theory and inventing new auction formats". It is important to note that the Nobel prizes are awarded not for theoretical research, but for their practical implementation. And Milgrom and Wilson have been implementing new auction formats for many years and “accustoming” a plethora of new industries to auctions. Milgrom's achievements have become particularly important in areas where “traditional” auctions have consistently faced issues - selling radio frequencies, selling places in search results, and other auctions where buyers cannot be sure of the benefits of the asset they receive. Because of this uncertainty, participants lower their bids or refuse to participate at all. This is the so-called “winner's curse” that has plagued auction mechanisms since time immemorial and limited their applicability. Nobel memorial prize in economic sciences winners managed to find a solution to this problem. It sounds simple - for every type of asset being sold, the auction model should be developed individually, taking into account all the features of the market, its players, and the product itself that [...]

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