Two U.S. game theory specialists were awarded the Nobel prize in economic sciences for their groundbreaking research.
Paul R Milgrom and Robert B Wilson won the award for their designs of mathematical models that made use of auction theory, a branch of game theory. Milgrom is a 72-year-old humanities professor at Stanford University and is known as one of the leading academics in the field of auction theory. Wilson, Milgrom’s 83-year-old Stanford colleague and thesis advisor, is an acclaimed professor of management and was Milgrom’s graduate professor.
The two received the award 26 years after John Nash, another game theorist, won the Nobel prize for his work in the same field. Nash’s life received the silver screen treatment in the 2001 film A Beautiful Mind, in which he was portrayed by Russel Crowe.
Auction theory is a branch of game theory that is used to create mathematical models that can project outcomes for auction bidding processes. Auction theory can be applied to a vast amount of fields and situations, but is perhaps most well known for being used in economics. Wilson helped pioneer the subject’s development in the late 1970s and early 1980s. Milgrom, Wilson’s grad student, further built on what Wilson had developed. While game theory has been used in the past in video game development, the term itself actually refers to how a set of choices can affect different outcomes.
Wilson and Milgrom’s work has had a major impact on the modern world. For example, in the 1990s the U.S. Federal Communications Commission used Wilson and Milgrom’s work on auction theory to better allocate radio frequency bands to telecom companies. The adjustments led to billions of dollars in sales over the span of the next two decades. Other countries followed suit to improve the allocation of their radio bands, as well in other industries, such as gas.
The Academy, which awards the Nobel Prize, said Milgrom and Wilson’s work with auction theory had helped design new mathematical formulas that are used to sell a diverse set of goods, including services such as fishing quotas, electricity allowances, and airport landing slots.
However, Milgrom and Wilson winning the award was not positively received by everyone in the academic community. Economist David Blanchflower criticized the academy for “playing economic games” and even went so far as to say that he was disappointed to see the award go to two elderly white men. He also said that he would have liked to see the award go to people who are “finding things about the real world.”
Last year’s Nobel prize for economic sciences went to scientists from Massachusetts Institute of Technology and Harvard University for experiment that sought to find the best way to solve poverty in developing countries.
Source: The Guardian
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