Contribution to the development of auction theory by Paul Milgrom and Robert Wilson Nobel Prize winners in economics for 2020

Nata Davlasheridze

Journal number 4 ∘ Nata Davlasheridze ∘
Contribution to the development of auction theory by Paul Milgrom and Robert Wilson Nobel Prize winners in economics for 2020

Doi: 10.36172/EKONOMISTI.2021.XVII.04.Nata.Davlasheridze

Expanded Summary

The article examines the contribution made by Paul Milgrom and Robert Wilson Nobel Prize winners 2020 in Economics laureates to auction theory. It is emphasized that they not only developed a general theory of auctions, but also significantly developed it. Based on the fundamental theory of auctions, Wilson and Milgrom tried to identify the links between the format of the bidding, their rules and final prices. Before them, simple auctions were analyzed, but they considered precisely complex ones. And most importantly, they applied their theory in practice and developed a new mechanism for organizing auctions on its basis.

The article shows the history of awarding Nobel prizes on this topic, as well as on two fundamental areas in mathematical economics - game theory and the design of mechanisms that are closely related to auction theory.

According to Milgrom and Wilson's auction theory, the outcome of the bidding consists of three factors:

• The first depends on the format of the auction and its rules (closed or open quotations, the allowed number of bids per participant, etc.).

• The second factor provides for the value of the auctioned object for each bidder (general or private).

• The third concerns uncertainty, that is, what information about the value of the object has different bidders.

This theory made it possible to design an auction format to create a greater value for the objects sold and at the same time ensured that they went to the participant who would best cope with the management of the acquired object.

EKONOMISTI The international scientific and analytical, reviewed, printing and electronic journal of Paata Gugushvili Institute of Economics of Ivane Javakhishvili Tbilisi State University

DOI: 10.36172/EKONOMISTI E ISSN 2346-8432 Print ISSN 1987-6890	Journal number 4 ∘ Nata Davlasheridze ∘ Contribution to the development of auction theory by Paul Milgrom and Robert Wilson Nobel Prize winners in economics for 2020 Doi: 10.36172/EKONOMISTI.2021.XVII.04.Nata.Davlasheridze Expanded Summary The article examines the contribution made by Paul Milgrom and Robert Wilson Nobel Prize winners 2020 in Economics laureates to auction theory. It is emphasized that they not only developed a general theory of auctions, but also significantly developed it. Based on the fundamental theory of auctions, Wilson and Milgrom tried to identify the links between the format of the bidding, their rules and final prices. Before them, simple auctions were analyzed, but they considered precisely complex ones. And most importantly, they applied their theory in practice and developed a new mechanism for organizing auctions on its basis. The article shows the history of awarding Nobel prizes on this topic, as well as on two fundamental areas in mathematical economics - game theory and the design of mechanisms that are closely related to auction theory. According to Milgrom and Wilson's auction theory, the outcome of the bidding consists of three factors: • The first depends on the format of the auction and its rules (closed or open quotations, the allowed number of bids per participant, etc.). • The second factor provides for the value of the auctioned object for each bidder (general or private). • The third concerns uncertainty, that is, what information about the value of the object has different bidders. This theory made it possible to design an auction format to create a greater value for the objects sold and at the same time ensured that they went to the participant who would best cope with the management of the acquired object.