http://www.sciencemag.org/news/2020/10/economics-nobel-honors-pioneers-auction-theory

Underlying carbon emission credits, electricity markets, and radio spectrum allocations is the humble and ancient sale format of the auction. This year’s Nobel Prize in economic sciences has been awarded to economists who pioneered auction theory and invented new formats that drastically shifted how public resources are allocated. The prize is shared by Paul Milgrom and Robert Wilson, both of Stanford University.

Before Wilson’s work in the 1960s and 1970s, research on auctions focused on each person’s private or subjective evaluation of the goods or services for sale. But underlying many auctions is a common value—a market price—that bidders share but must estimate independently. Wilson used game theory to establish the best bidding strategy in common value auctions, and showed how it leads to low bids as people try to avoid the “winner’s curse”—overestimating the common value and winning the auction at too high a price.