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Auction theory is a branch of applied economics that deals with how bidders act in auctions and researches how the features of auctions incentivise predictable outcomes. Auction theory is a tool used to inform the design of real-world auctions. Sellers use auction theory to raise higher revenues while allowing buyers to procure at a lower cost.
The second is auction theory and practice, where he examines the auctioning of interrelated items, such as radio spectrum, electricity, financial securities, rough diamonds, airport slots, and top-level domains. His work in bargaining and auctions is closely tied to his third theme: market design. His market design work concerns communications ...
Milgrom is an expert in game theory, specifically auction theory and pricing strategies. He is the winner of the 2020 Nobel Memorial Prize in Economic Sciences, together with Robert B. Wilson, "for improvements to auction theory and inventions of new auction formats". [2] [3] He is the co-creator of the no-trade theorem with Nancy Stokey.
The Netherland auction that took place 3 months later raised 1/4 of the revenue per head of population, and the difference has been attributed to the auction design. [13] It has been argued that the UK Treasury owes £15 billion or more to him and Ken Binmore , who led the auction team.
Robert Butler "Bob" Wilson, Jr. (born May 16, 1937) is an American economist who is the Adams Distinguished Professor of Management, Emeritus at Stanford University.He was jointly awarded the 2020 Nobel Memorial Prize in Economic Sciences, together with his Stanford colleague and former student Paul R. Milgrom, [2] "for improvements to auction theory and inventions of new auction formats".
The winner's curse is a phenomenon that may occur in common value auctions, where all bidders have the same value for an item but receive different private signals about this value and wherein the winner is the bidder with the most optimistic evaluation of the asset and therefore will tend to overestimate and overpay.
In fact, we can use revenue equivalence to prove that many types of auctions are revenue equivalent. For example, the first price auction, second price auction, and the all-pay auction are all revenue equivalent when the bidders are symmetric (that is, their valuations are independent and identically distributed).
Vickrey was the first to use the tools of game theory to explain the dynamics of auctions. [5] In his seminal paper, Vickrey derived several auction equilibria, and provided an early revenue-equivalence result. The revenue equivalence theorem remains the centrepiece of modern auction theory. The Vickrey auction is named after him. [5]