Avoid the Auction Winner’s Curse
Nobel Prize Winning Techniques to Minimize Regret
Your cellphone works thanks to the careers of two American economists — and they just won the Nobel Prize in Economics.
(More accurately: The 2020 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.)
Their work may not help you win more eBay auctions or to pay less money — but it can help you understand the psychology behind the most effective bidding techniques.
And it is helping to organize the world so it functions efficiently, saving us all money.
Paul Milgrom and Robert Wilson (both of Stanford University) are known for coming up with Auction Theory — how to put together auctions that make money for whoever is selling something.
We’re all familiar with standard auctions where we bid against each other for an item.
But there’re many auctions that are not as well known, but are even more important: spectrums of radio broadbands, fishing rights and emissions allowances for carbon dioxide.
These often involve the government, which wants to maximize revenue the same as any business — but also to attain social goals of encouraging competition and giving consumers choices.