What the 2020 Nobel Prize Means for SCM
This year’s Nobel Memorial Prize in Economics goes to Paul R. Milgrom and Robert B. Wilson “for improvements to auction theory and inventions of new auction formats”. Wilson “developed the theory for auctions of objects with a common value – a value which is uncertain beforehand but, in the end, is the same for everyone”. Examples for this include the volume of minerals in a particular area and the future value of radio frequencies. Milgrom “formulated a more general theory of auctions that not only allows common values, but also private values that vary from bidder to bidder”. He demonstrated that an auction format “will give the seller higher expected revenue when bidders learn more about each other’s estimated values during bidding”. I am sure their work will now attract even more attention in the SCM discipline, because auctions already play an important role in many supplier–buyer relationships. Let us not forget the important work on auctions that has already been conducted in our discipline, for example by Wagner & Schwab (2004), Hartley and her coauthors (2006) and Carter & Kaufmann (2007), to name just a few.