The Nobel prize for economics was awarded on Monday to two US game theory specialists, 26 years after John Nash – the Princeton academic depicted by Russell Crowe in the 2001 film A Beautiful Mind – won for his groundbreaking work on the same subject. Americans Paul R Milgrom and Robert B Wilson won for the designs of mathematical models that promote “improvements to auction theory and inventions of new auction formats”, said Göran K Hansson, secretary-general of the Royal Swedish Academy of Sciences. Milgrom, 72, the Shirley and Leonard Ely professor of humanities and sciences at Stanford University, is one of the leading lights in auction theory, along with his Stanford colleague and thesis adviser Wilson, 83, the Adams distinguished professor of management. The award, which comes with a 10m krona (£850,000) cash prize and a gold medal, caps a week of Nobel prizes and is technically known as the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. Auction theory, which is a branch of game theory, was developed in the late 1970s and early 1980s after a group of researchers set about building mathematical models that could introduce incentives and information into the auction bidding process to maintain a fair market and prevent collusion among the bidders. It came to prominence in the UK in the early part of the century when the government, with the support of the Oxford academic Paul Klemperer, was credited with extracting one of the largest sums obtained by any country from the big phone providers following the auction of new mobile phone spectrum. The Academy said the auction theory developed by Milgrom and Wilson had helped design new formats that are now used to sell such diverse goods and services as fishing quotas, airport landing slots and electricity allowances. The economist David Blanchflower, a former Bank of England policymaker, said the award failed “to reward people for finding things about the real world rather than for playing economic games”. He said: “The Nobel prize in economics once again goes to a couple of old white men who published esoteric mathematical squiggles years ago that have little or no bearing on the lives of ordinary people. Their work has nothing to say about improving the condition of the man or woman on the Clapham omnibus. “Work on the auction price of fish in the Indian Ocean doesn’t seem that important in the midst of a pandemic with people struggling to pay the bills. Economics has lost its way.” Speaking to reporters in Stockholm by phone after learning of his win, Wilson struggled to think of an auction in which he himself had participated. But then added: “My wife points out to me that we bought ski boots on eBay. I guess that was an auction.” Nash developed the Nash equilibrium to analyse situations of conflict and cooperation and produce predictions about how people will behave. It found application in fields as diverse as computing, evolutionary biology and artificial intelligence. Last year’s award went to two researchers from the Massachusetts Institute of Technology and a third from Harvard University for pioneering on-the-ground experiments to discover the most effective ways to tackle poverty in the developing world. There was speculation ahead of the award that American Claudia Goldin, whose research has focused on inequality and the female labour force, would become the third woman to receive the prize. Another contender was her compatriot Anne Krueger, formerly the number two and briefly the managing director at the International Monetary Fund, who has studied how businesses use their economic and political power to dominate markets, and is a free-trade activist.