Economy & Politics

AwardNobel Prize: How two US economists invented the modern auction

Paul R. Milgrom and Robert B. Wilson were honored with the Nobel Prize in Economics for their contribution to auction theoryimago images / TT

One of the largest auction in German economic history ended on August 18, 2000. At that time, mobile phone companies offered 98,807,200,000 marks for UMTS licenses, the equivalent of around 50.8 billion euros. What many know today: The standard hardly prevailed, it was a huge flop for the winners of the auction.

What very few people know: the auction process behind it was much better than all previous authorlisten, even nobel prize worthy. It comes from this year’s winners of the Nobel Prize in Economics, the US economist Paul Milgrom (72) and Robert B. Wilson (83). They researched how to set up auctions in such a way that they generate the greatest benefit for everyone involved.

On Monday drew the Royal Swedish Academy of Sciences sie for it with the Nobel Prize. “Sellers, buyers and taxpayers all over the world have benefited from their findings,” said the Nobel Committee’s statement of reasons.The examples today range from electricity markets to advertising contracts on the Internet and real estate to government tenders – some of them have also shaped Milgrom and Wilson’s work.

Founder of the multi-stage auction process

To the Licenseauctions for radio frequencies their performance becomes particularly evident: If a wireless service provider secures a certain frequency range, it roughly determines how much data the company can use and how many customers it can serve.

In the US were frequencies in blocksin certain frequency ranges raffled. It was thought that the market would regulate the allocation and waited for the frequency blocks to end up at the various mobile phone companies through market mechanisms. But that didn’t work. Instead, many owners speculated with the frequency blocks. The result: no company was able to offer uniform network coverage across the entire country. The state, which actually wanted to earn a lot of money, missed a large part of the possible income.

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