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Paul R. Milgrom and Robert B. Wilson will together receive the Swedish Riksbank Prize for Economics in memory of Alfred Nobel in 2020. The duo will receive the award for “improvements in auction theory and inventions of new auction formats.”
The frequencies for the transmission of radio, television, data and communications are limited and auctions are used to distribute them.
Among other things, the researchers’ auction format was used as a basis when Swedish telecom operators received their licenses in the 1990s. An auction of license rights for the 5G network will take place in a month, where Paul R. Milgrom designed the format.
– Auctions are everywhere and affect many things. Electricity is bought through auctions, which affects the price you pay each month, in the EU auctions are used in the system with emission rights and every time you open your browser you find ads that are sold in real time through auctions. The entire financial market is governed by auctions and this indirectly affects your pension. Because auctions are so popular and used to such an extent today, it is important that we understand how they work and are designed. This is what this year’s award is all about, says Tommy Andersson.
It becomes more complex
As new technology develops, it has become increasingly narrow and lacks frequencies. It is about being able to transmit radio, television, data and communications efficiently. Over the past 30 years, frequencies have become hard currency and licensing auctions more complex.
In most countries, it is the state that has control over the networks and distributes the licenses.
– For a country, this is quite large income for the Treasury. But it is not just about money, there must be a good combination between the actors so that the networks are used efficiently and generate the greatest possible social benefit. It happens that states buy back the frequency spectrum that they see is not being used efficiently and repackage it to make better use of the frequencies.
Are there any criticisms of these auctions?
– Yes, there are auctions that have gone wrong and cost billions, but then you must remember to differentiate between the auction format and the circumstances. An auction is designed for certain certain conditions, and if they are changed, the auction may fail. If a lot of time passes between the auction design and the auction itself, players can create posters or strategies to profit.
