2020 Nobel Prize for Economics Awarded to Milgron & Wilson
Earlier this week, The 2020 Nobel Prize for Economics was awarded to two Stanford University researchers. Paul Milgron and Robert Wilson were selected by the Nobel Assembly for what is called the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.
The pair received this year’s Nobel Prize for what the assembly cited as “improvements to auction theory and inventions of new auction formats.”
Watch the 2020 Nobel Prize for Economics Announcement
credit: nobelprize.org
Celebrating their achievements, the National Science Foundation (NSF) released a statement in which they touted the work, done by Milgron and Wilson, that led to the award.
The NSF has been a sponsor of the two researchers over the years. The pair had received funding for research into game theory. This work ultimately helped them develop the auction system for which they are now being honored.
NSF Director Sethuraman Panchanathan issued the following statement on the Nobel announcement:
“Cooperation and competition are fundamental aspects of economics, and they govern the complex auctions societies use to allocate everything from minerals and energy to landing slots at airports,” said NSF Director Sethuraman Panchanathan.
“Understanding how bidders process information is crucial for designing these auctions, especially when the seller’s primary goal is to benefit society.”
The auction formats that Milgron and Wilson developed allow multiple, simultaneous transactions in a highly complex and efficient manner.
Why Auction Formats are Nobel Prize Worthy
If you’re wondering why the development of complex auctions deserves government funding, here’s an example.
Wireless carriers like Verizon, AT&T and others have to pay license fees to the Federal Communications Commission (FCC) for the use of the radio spectrum in which they broadcast and receive all of your cell phone calls and data.
There is a limited amount of this spectrum bandwidth. As a result, competing carriers pay a premium for it. What’s more, they have to bid for it with the FCC.
According to the NSF, the license fees from these wireless carriers have been worth over $60 billion for U.S. taxpayers. The auction formats developed by the Nobel Prize winning pair are used to award the bids and generate that revenue.
About the Author
