What 5G auctions have to do with the 2020 Nobel Prize in Economics
Winners Paul Milgrom and Robert Wilson explored the theory governing public service calls and tenders between suppliers
Paul Milgrom and Robert Wilson Nobel Prize Winners for Economics 2020 (Illustration: Niklas Elmehed - © Nobel Media) The 2020 Nobel Prize in Economics awarded jointly to Paul R. Milgrom and Robert B. Wilson, both professors at Stanford University, was recognized for the commitment that the two scholars have put into the definition and development of auction theory, increasingly at the center of numerous transactions involving the sale of services and objects both in the private sector, especially online, and above all in the public sector.Their research on the functioning of auctions has led to definition of new auction formats used above all for the assignment of various services and goods, such as frequencies in telecommunications or those relating to the c oncessions for oil exploration and drilling and in general to offers in the energy sector.
Wilson's reading
In particular, Professor Robert Wilson has developed a theory that borders on human sciences and especially investigates auctions of objects or services of common value, i.e. those in which the goods have the same value for each bidder but each of them can have different estimates of that value based on the information and considerations made by individual customers .According to Wilson, this situation occurs in cases such as that of drilling rights for oil or precisely for radiofrequency auctions, where bidders will assign a different estimate to an object depending on the expectations and degree of knowledge of the situation. Here we can verify the case in which the offers will be lower than the real value of the asset for fear of paying too much, that is what happens with the winner's curse, when whoever wins the asset realizes that he has paid too much for it. value.
Milgrom's reading
For his part, Professor Paul Milgrom, who was also a student of Wilson at Stanford, has developed a theory according to which the private values of an asset they may vary from one bidder to another based on knowledge of the property and the behavior of the contenders. From here, then, the two scholars have also developed auction forms in which different types of interconnected products are offered for sale, so as to ensure the best match between supply and demand.From game theory to auctions
From the initial link with game theory, in the economic field, auction theory takes on an increasingly important value when the players in the field grow in the various commercial and supply sectors of services. For this reason, for example, the auction protocol developed by Milgrom and Wilson is now used by the Federal Communications Commission (FCC) for the allocation of telephone frequencies to the various companies.The Academy of Sweden therefore wanted to reward with the highest recognition for economic sciences the development and development of a system in which adequate selection methods and tools become central to governments and institutions when selecting their trading partners in the way better.
In addition, this type of assignments and decisions are increasingly topical in very different areas, from the assignment of television or telephone frequencies, such as those of 5G, to the increasingly pressing ones relating to supplies of vaccines and health materials, essential for the future phases of the Covid-19 emergency.
