Milgrom & Wilson

This year’s Laureates in Economic Sciences, Paul Milgrom and Robert Wilson, have devoted their lives to the study of auctions and the practical application of their research. Auctions serve a central role in society providing a framework for procurement of public services like the construction of new infrastructure, the sale of power capacity to electricity generators, the sale of radio frequencies to telecom operators for our cellphone coverage, and in the future the sale of airspace for unmanned aerial vehicle operators. The Stanford professors have focused their research on complex public assets, where achieving the highest price is not the only aim, but also maximizing the long term benefit for society. Their best known contribution is the auction they designed the first time the U.S. sold radio frequencies permitting wireless communication (ie. mobile calls, internet payments, video meetings) to telecom operators. The new auction format they structured was the Simultaneous Multiple Round Auction (SMRA), which offered all frequencies simultaneously. When the FCC first used a SMRA, it sold 10 licenses in 47 bidding rounds for a total of $617 million – prior to this format, the U.S. had allocated licenses for free. Stanford (5 minutes)