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Stanford Pair Win Nobel For Economic Ideas Driving Ebay, Cellphone Spectrum Sales

Stanford Pair Win Nobel For Economic Ideas Driving Ebay, Cellphone Spectrum Sales

by Erik Sherman

Going once, going twice—the winners of this year’s Nobel Prize in Economic Sciences are two Stanford economists whose work lets the world make mobile phone calls, switch on a light, and buy and sell on eBay.

Robert Wilson and Paul Milgrom, are famous for their groundbreaking work on auction theory. They took the 2,500-year-old practice of selling goods to the highest bidder and transformed how they worked and how the world looked at a result.

One of the major areas they developed was analysis of how the rules that govern auctions affect the efficiency of the outcomes—how bidders get the value they want, sellers maximize their income, and the process can happen more easily and quickly. Then they found ways to move beyond the fast-talking and gavel-banging stereotype of an auction and into many new types that new rules could enable.

“Sometimes the invisible hand of the market needs help,” said Scott Kominers, an associate professor of business administration at the Harvard Business School. “Historically, [economics has] been a social science that’s deeply concerned with the real world but often not directly practical. They were real visionaries in understanding how economics could play this role.”

“Their work was absolutely pivotal,” said Brennan Platt, an associate professor of economics at Brigham Young University. The two are described as brilliant and more than one person told Zenger News that each of them could have conceivably won a Nobel for his other work.

A fundamental problem of auctions is that much important information is invisible. Bidders

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Stanford economists awarded Nobel Prize for work on auction theory

Stanford economists awarded Nobel Prize for work on auction theory

Stanford University professors Paul Milgrom and Robert Wilson have been awarded the 2020 Nobel Prize in economics for esoteric insights that have brought order to the power grid, mineral rights and other critical but complex parts of our economy.

Their discoveries pioneered a new approach to how auctions work – and now serve as the conceptual underpinning of bids for services that are difficult to sell in a traditional way, such as bands of radio spectrum and cell service licenses.

Their strategy can be used to improve the allocation of respirators and Personal Protective Equipment in future pandemics. In the early days of the COVID-19 crisis, states bid against each other for supplies, escalating prices and creating chaos.

When the Federal Communications Commission takes bids to allocate radio spectrum for fiercely competitive telecommunication licenses – cell phone rights in northern and southern California markets, for example – it enlists Milgrom’s and Wilson’s strategy.  This approach has been adopted in countries around the world.

“This year’s Laureates in Economic Sciences started out with fundamental theory and later used their results in practical applications, which have spread globally. Their discoveries are of great benefit to society,” Peter Fredriksson, chair of the Nobel prize committee, said in a statement.

Neighbors on campus, the two long-time friends and collaborators were startled by Monday morning’s news. Wilson, professor emeritus at the Stanford Graduate School of Business, was Milgrom’s mentor. Milgrom is a professor in the university’s School of Humanities and Sciences.

Wilson’s phone ringer was on ‘silent’ mode, so the Nobel committee called his wife instead. Milgrom, sound asleep, was also incommunicado.

In the predawn darkness at 2:15 a.m., Wilson and his wife Mary crossed the street and repeatedly rang the video-activated doorbell to awaken Milgrom. The drama is recorded on Milgrom’s Nest home security

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Detroit-born economist Paul Milgrom wins Nobel Prize in economic sciences

Detroit-born economist Paul Milgrom wins Nobel Prize in economic sciences

It was in the middle of the night and the Nobel Prize committee couldn’t reach their 2020 economic sciences winner, Detroit-born professor Paul R. Milgrom. 



a screenshot of a computer screen: Winners of the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for 2020 at a press conference in Stockholm, Monday Oct. 12, 2020. Americans Paul R. Milgrom, left, and Robert B. Wilson have won the Nobel Prize in economics for "improvements to auction theory and inventions of new auction formats."


© Anders Wiklund/TT via AP
Winners of the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for 2020 at a press conference in Stockholm, Monday Oct. 12, 2020. Americans Paul R. Milgrom, left, and Robert B. Wilson have won the Nobel Prize in economics for “improvements to auction theory and inventions of new auction formats.”

Luckily, Milgrom’s co-winner is also his neighbor.

According to Stanford University, where the winning duo currently teaches, Robert B. Wilson trekked to Milgrom’s house in the middle of the night, knocking incessantly to tell him the good news. 

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You can watch that moment, and the Michigan-raised winner’s stunned reaction, below.

Milgrom was born in Detroit in 1948. He graduated Oak Park High School and went on to complete his bachelor’s degree in mathematics at the University of Michigan, Ann Arbor.

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He and Wilson won for their improvements to auction theory and inventions of new auction formats. According to the Nobel Prize, “(t)heir discoveries have benefitted sellers, buyers, and taxpayers around the world.”

So…what is auction theory? 

People are usually selling things to the highest bigger and buy from the cheapest offer. But the price of an auctioned object — whether it is an art or an antique — changes wildly from auction to auction, the Nobel Prize release explained. 

Milgrom and Wilson studied how auctions work, which is difficult because there are so much factors to take in, especially the bidder’s behavior. They focused on things that are a little harder to auction, like securities, minerals and energy. 

Wilson’s theory

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2 U.S. Economists Awarded Nobel Memorial Prize in Economic Sciences : NPR

2 U.S. Economists Awarded Nobel Memorial Prize in Economic Sciences : NPR

The Nobel Prize gold medal during manufacture at the Swedish Mint. Each laureate receives the medal, which has the likeness of Alfred Nobel on its face.

Markus Marcetic/Courtesy of Myntverket (Swedish Mint)


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Markus Marcetic/Courtesy of Myntverket (Swedish Mint)

The 2020 Nobel Memorial Prize in Economic Sciences was awarded to Paul Milgrom and Robert Wilson, both of Stanford University. The prize citation says Milgrom and Wilson were awarded the prize “for improvements to auction theory and inventions of new auction formats.”

“Auctions are everywhere and affect our everyday lives.” the prize committee said in a statement. Milgrom and Wilson’s work “benefit[s] sellers, buyers and taxpayers around the world.”

The Prize in Economic Sciences was established in 1968 by the Sveriges Riksbank, Sweden’s central bank, to mark its 300th anniversary. It was first awarded in 1969, joining the five original prizes established by Alfred Nobel in his 1895 will.

Like the winners in physics and chemistry, the laureates in economic sciences are selected by the Royal Swedish Academy of Sciences in Stockholm. The prize brings with it a gold medal and a cash award which this year is 10 million Swedish krona ($1.12 million), which will be shared by Wilson and Milgrom.

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Nobel Prize in Economic Sciences Is Awarded to U.S. Academics for Invention of New Auction Formats

Nobel Prize in Economic Sciences Is Awarded to U.S. Academics for Invention of New Auction Formats

U.S. academics Paul R. Milgrom and Robert B. Wilson shared the Nobel Prize in Economic Sciences for new insights into how auctions work, and how different auction designs can help buyers and sellers meet their goals.

The announcement Monday gave the U.S. a clean sweep of this year’s Nobel Prizes, with at least one American citizen winning in each of the five categories for which individuals were selected.

“There has been an enormous investment in research in the U.S., and that has paid off,” said Göran K. Hansson, secretary-general of the Royal Swedish Academy of Sciences, which awards the prizes.

Auctions play a big part in setting the price of many of the goods and services people use every day, although their reach isn’t always appreciated, even by those who have spent decades studying them.

In a news conference announcing the prize, Dr. Wilson initially declared that he had never taken part in an auction explicitly, before being reminded that wasn’t the case.

“My wife points out to me that we bought ski-boots on eBay, and I guess that’s an auction,” he told reporters.

The internet has helped make auctions even more pervasive in daily life, but the breakthroughs for which the prize was awarded predate its arrival.

The application of the insights and new designs developed by Drs. Milgrom and Wilson have been particularly significant for allocating public goods, such as radio spectrum, fishing quotas and airport landing slots.

While governments and taxpayers want to maximize their revenues from selling those goods, the danger is that they will be too successful, and force the winner to pay so much that delivery of the associated service—such as mobile phone connections, or flights—is impaired. Understanding how auction formats match complex objectives helps avoid such outcomes.

Their theory has benefited “buyers sellers,

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