October 27, 2020 ~ 3 min read

Auction Theory applied to a job search

Nobel Prize Idea

So it recently did the rounds in the news - Nobel Prize in Economics was awarded to Paul Milgrom and Robert Wilson for their work on auction theory.

Nobel: US auction theorists win Economics Prize - BBC News

What is Auction Theory?

Milgrom and Wilson’s research focused on “unknown common values” - the value of a thing or a resource is the same for everyone, but no one is quite sure how much it’s worth, because they don’t know how much they can make out of the resource. They found that when this is the case, bidders tend to bid low to avoid the winner’s curse (overpay for something worth much less). If everyone bids low, the seller is sad.

Our friends, Milgrom and Wilson, thought of some formats that are designed to reduce the problem of “unknown common values”.

For example, use multiple rounds, and between each round, information about all the bids is revealed, so everyone knows what’s everyone bidding, so no one is afraid they are overbidding. The next round has a minimum bid of a maximum bid from the previous round. This is repeated until there is a clear winner. The seller gets top dollar, and the winner knows that what they are getting is well-valued by the other market participants.

Can devs use this for job offers?

Do I think candidates can get over the initial awkwardness of the notion and ditch the current best practices?

Maybe... Is anyone willing to start a spreadsheet with all their offers that they later email to everyone who offered them a job, until there is only one highest bidder?

In reality, this isn't any different from what we're doing now, but on a smaller scale and with individually crafted emails.

The negotiation phase of the offer is fraught with faux pas and one needs to be clued up on the matter to secure a decent package. I don’t even want to blame the companies for taking advantage of the inexperienced candidates, but it’s worth pointing out that it’s not uncommon to hear people complain that they were afraid to negotiate and as a result feel underpaid when they discover their peers’ pay rates.


Yes, compensation is complex, there is much more to it than just monetary reimbursement, but for this scenario please consider that the candidate evaluates the offer purely on £££ value, with all other things being equal.

Some notes and sources:

“Ok, still not quite sure, can you please ELI5?”

Sure thing, here’s reddit's ELI5

“Sorry, I don’t really like reading, do you have a podcast link or something?”

Sure, here’s the BBC’s More or Less episode explanation BBC Radio 4 - More or Less: Behind the Stats, Auction Theory - Paul Milgrom and Robert Wilson

“Yeah, I don’t think I still have enough info, can you give the source to a proper explanation?”

Straight from the horse’s mouth: Paul Milgrom’s book on UCLA website

Would you try this?

I really want to hear your thoughts! I did make a survey on LinkedIn and it TANKED! Got 2 replies, so clearly not enough to be decisive. Please let me know what you think.

Maxi Ferreira

Hey! Thanks for reading! Follow me on Twitter @alanmynah to let me know what you thought, keep in touch or ask questions. Would be super happy to have a chat!