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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.