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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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