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Paul Milgrom wins BBVA Frontiers of Knowledge Award!

February 19, 2013

The BBVA Foundation announced in Madrid today that Paul Milgrom has won the 2012 Frontiers of Knowledge Award in the area of economics, finance and management. According to the prize jury, the prize was awarded “for his seminal contributions to an unusually wide range of fields of economics including auctions, market design, contracts and incentives, industrial economics, economics of organizations, finance, and game theory.” BBVA’s award announcement can be found on their website in Spanish or English and its interview with Paul is available online here.

The prize ceremony will take place on June 20, 2013, in Madrid, Spain.

The Frontiers of Knowledge and Culture Awards have been given since 2008. Each award comes with a €400,000 cash prize, a diploma and commemorative artwork. Past winners in this category of economics, finance and management include Jean Tirole, Andreu Mas-Colell, Hugo Sonnenschein, Lars Peter Hansen, and Angus Deaton.

The jury in this category was chaired by Kenneth J. Arrow, Nobel laureate in Economics and Professor of Economics and of Management Science and Engineering, Emeritus, at Stanford University (United States), with José Manuel González-Páramo, Visiting Professor at IESE Business School (Spain), acting as secretary. Remaining members were Andreu Mas-Colell, Professor of Economics at Pompeu Fabra University (Spain); Joel Mokyr, Robert H. Strotz Professor of Arts and Sciences and Professor of Economics at Northwestern University (United States); Albrecht Ritschl, Professor of Economic History at the London School of Economics (United Kingdom); and Jean Tirole, Chairman of the Board of the Fondation Jean-Jacques Laffont at Toulouse School of Economics (TSE)and Scientific Director of Toulouse University’s Institute for Industrial Economics (France).

The full jury citation reads as follows:

Paul Milgrom has made seminal contributions to an unusually wide range of fields of economics including auctions, market design, contracts and incentives, industrial economics, economics of organizations, finance, and game theory.

His work on auction theory is probably his best-known. He has explored issues of design, bidding and outcomes for auctions with different rules. He designed auctions for multiple complementary items, with an eye towards practical applications such as frequency spectrum auctions. Professor Milgrom’s research in industrial organization includes influential studies on limit pricing, entry deterrence, predation, and advertising. In addition, Milgrom has added important novel insights to finance, particularly in connection to speculative trading and market micro-structure. The common theme of his works on auctions, industrial strategies, and financial markets is that economic actors infer from prices and other observables information about the fundamental market values.

He has also contributed to agency theory by describing conditions under which linear incentives are optimal, and by developing a tractable model of multitask agency relationships. His work on contract and organization theory has been very influential in management science. Finally, Professor Milgrom has contributed to mathematical economics and game theory, with studies on reputation and adaptive learning.

Alvin Roth and Lloyd Shapley Awarded the Nobel Prize in Economics

December 15, 2012

The 2012 Nobel prize for economics celebrated the new field of Market Design. Lloyd Shapley - a mathematician - wrote the first analyses that made the development of this field possible. Alvin Roth not only advanced the theory but also put the new market design analyses to work in important matching applications, including one for assigning kidneys to patients and others for assigning students to schools in NYC and Boston.

Al Roth and Paul Milgrom had designed and co-taught the first course on Market Design at Harvard and MIT in the years 2000 and 2001. Paul and his wife, Eva, were part of the Roth entourage in Stockholm and can be seen below with Al and Emilie Roth at the Grand Hotel, just before their departure for the Nobel prize ceremonies.

FCC Votes 5-0 to Propose Incentive Auction

September 28, 2012

“This is a big deal.” With those words, FCC Chairman Julius Genachowski introduced the FCC’s latest initiative to develop a wireless information superhighway for US businesses and consumers. The Commissioners voted 5-0 to propose a system that would encourage U.S. television broadcasters to turn in their spectrum licenses in exchange for a portion of the proceeds from reselling those licenses. The notice of proposed rulemaking that the FCC adopted included the auction design proposed by a Milgrom-led team. Other team members included Professors Lawrence Ausubel, Jon Levin and Ilya Segal.

Milgrom has been involved in developing the original US auctions as well. As Chairman Genachowski explained, “due to the incredible work of FCC staffers like Evan Kwerel and Greg Rosston and outside experts like Paul Milgrom, the auction turned out to be a major success. Fortunately, Evan and Greg and Paul are engaged in this proceeding as well.”

The Incentive Auction is exciting for both commercial and scholarly reasons. Commercially, the the sums involved in the auctions to buy spectrum from broadcasters and sell it for flexible use are expected to be in the tens of billions of dollars. And, the U.S. government considers the development of broadband networks now to be comparable to the development of the highway system in the mid-20th century, calling it “the infrastructure project of the 21st century.”

For scholars, there is additional excitement because the Incentive Auctions raise design issues that have not been previously encountered or studied. Milgrom and Segal plan to issue an academic paper soon explaining the novel theory underlying the design.