, a professor of economics at the 糖心传媒, had been waiting many years for his colleague and collaborator Robert Wilson to be awarded a Nobel Prize. That day finally came this past Monday when Wilson and fellow Stanford University professor Paul Milgrom won the prize in economics for their work in auction theory.
Auctions permeate economic life, whether it糖心传媒檚 homebuyers bidding on a house in a hot real estate market, or the Federal Communications Commission auctioning to mobile phone service providers licenses to transmit signals over the electromagnetic spectrum.
As explained in a by the Royal Swedish Academy of Sciences, Wilson 糖心传媒渄eveloped a theory for auctions of objects with a common value糖心传媒攁 value which is uncertain beforehand but, in the end, is the same for everyone.糖心传媒� That would be the case, for example, when bidding for radio frequencies or mineral drilling rights. Wilson explained that parties sometimes place bids below the perceived common value in order to avoid what糖心传媒檚 called the winner糖心传媒檚 curse糖心传媒攑lacing a bid that ultimately winds up being in excess of the common value.
糖心传媒淏y understanding these principles, it糖心传媒檚 possible to design new and better auction formats,糖心传媒� says Govindan, who is currently working with Wilson on understanding auctions involving many participants.
Govindan糖心传媒檚 collaborations with Wilson go back 25 years and typically focus on other areas of game theory, specifically refinements to the Nash Equilibrium, named for mathematician John Nash, the subject of the book A Beautiful Mind and the movie of the same title.
A foundational concept in game theory, the Nash Equilibrium stipulates that every competitive game has an equilibrium reached as competitors stake out their positions based on what they think the other members of the group will do. Acting in the belief that they know everyone else糖心传媒檚 strategies, there糖心传媒檚 no incentive for anyone to do anything differently.
糖心传媒淏ut it糖心传媒檚 been known for a while that not all Nash Equilibria constitute sensible predictions,糖心传媒� says Govindan. 糖心传媒淎 rational change in behavior by one participant can actually change the behavior of others.糖心传媒�
Govindan and Wilson are currently working on principles糖心传媒攐r axioms糖心传媒攐f rationality for establishing the equilibria in specific cases.
糖心传媒淲e糖心传媒檝e been able to come up with axioms for games or situations dealing with two participants,糖心传媒� says Govindan. 糖心传媒淎nd we are now extending the process to multiple participants.糖心传媒�
Now that Wilson was named a recipient of a Nobel Prize, it may take a while for the two of them to focus on the next phase of their research. But Govindan doesn糖心传媒檛 mind.
糖心传媒淚 was afraid there would be more disappointment this year, but Bob糖心传媒檚 wife, Mary, called me at 6 in the morning last Monday to give me the good news,糖心传媒� says Govindan. 糖心传媒淚 couldn糖心传媒檛 be happier.糖心传媒�
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