Two Stanford University professors who helped design auction theory, which is used to allocate mobile phone frequencies in the US, will share this year’s Nobel Prize in economics.
Paul Milgrom, 72, who lives across the road from Robert Wilson, 83, in California, knocked on his neighbour’s door in the early hours of this morning to share the news of their joint victory.
Technically known as the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, the award was established in 1969 and is now widely considered one of the Nobel prizes.
The Royal Swedish Academy of Sciences said the pair’s main contribution was devising new auction formats for goods and services that are difficult to sell in a traditional way.
In the early Nineties they designed the first US auction of radio frequencies to telecommunications operators, overcoming the quandary of operators not knowing how much the licence for one area was worth until all the licences were allocated.
Their solution has since been applied to set prices for electricity and gas.
Dr Milgrom, who has advised Google, Yahoo, Microsoft and governments around the world, was supervised by his co-winner on his thesis.
Dr Wilson told a press conference the last item he bought at auction was ski boots on eBay. “I guess that’s an auction,” he added.
Past winners include Esther Duflo, Abhijit Banerjee, Michael Kremer, Paul Krugman, Daniel Kahneman, Amartya Sen and Milton Friedman.
Only two women have ever received the prize, worth $1.1m (£844,123), which Dr Milgrom and Dr Wilson will split.
Peter Fredriksson, chair of the prize committee, said: “This year’s laureates in economic sciences started out with fundamental theory and later used their results in practical applications, which have spread globally. Their discoveries are of great benefit to society.”