Two Stanford economists were awarded the Nobel Prize on Monday for bolstering how auctions work. This research underlies much of the economy recently.

According to the Nobel Prize Committee, discoveries made by Paul Milgrom and Robert Wilson from Stanford University "have benefitted sellers, buyers, and taxpayers around the world," reported AP News.

Auctions could be seen everywhere. They specify how Google sells advertising and how much consumers pay for electricity.

Wilson, Milgrom: Two Stanford Economists Granted Nobel Prize

Wilson was once Milgrom's Ph.D. adviser, and both are neighbors. According to Milgrom, contacted by phone at his California home, he received the news in an unusual manner. He said that he got a knock at his door from Bob Wilson in the middle of the night.

The two American economists were lauded for improving the auction theory. They invented new and improved auction formats that are now used in numerous parts of the economy. One of such transformed the telecoms industry.

Monday's award concludes 2020's Nobel prizes. It is technically known as the Sveriges Riksbank Prize in Economic Sciences.

According to Milgrom, 72, his students, friends, and colleagues had long supposed that he and Wilson, 83, deserve such recognition. Milgrom said it was nice to have their respect and affection.

Security camera footage at Milgrom's house recorded the special moment. Wilson spoke to the intercom of Milgrom's home in the dead of night, saying, "Paul. It's Bob Wilson. You've won the Nobel Prize,'' reported The Michita Eagle.

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The Nobel Prize for Economics is technically named the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. The honor was initiated in 1969.

The two men examined the tricky dilemma of making auctions function efficiently. According to the committee, Wilson's work displayed "why rational bidders tend to place bids below their own best estimate of the common value." This could mean the product goes for less than its worth and perhaps not to the purchaser who most wants it.

"Online advertising is sold at auction," according to David Warsh, who traces economic research at his blog Economic Principals. "That Google was able to adopt the method so quickly and seamlessly depended entirely on the theory developed by Milgrom and his competitors and their students.″

Auctions pose the most fundamental questions in economics, which are who should get the goods and how much they are worth, stated economist Peter Cramton, a former student of Wilson's now at the University of Maryland and the University of Cologne in Germany. The winners' work offers guidance about "how to price and allocate scarce goods -- radio spectrum, electricity, financial securities, and many more.''

According to the committee, Wilson's work exhibited "why rational bidders tend to place bids below their own best estimate of the common value." The impact of their work is apparent everywhere.

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