Better business for the Government from UCL
Using game theory to design Government's auction for 3G phone licenses
Professor Ken Bilmore (UCL Economics) helped to design the rules for the sale of contracts for third generation (3G) mobile phone licenses, raising £22.5 billion - equivalent to 2.5% of GDP.
Professor Bilmore and colleagues drew on their research into game theory and the economics of competition to advise the Government on the design and implementation of the licence auction. All the companies had to bid simultaneously; as the bids increased, each company re-assessed whether they would still make a profit despite the rising costs - so the winning bids came from the best business cases.
The enormous sum raised for the Government contrasted with the sale of the ‘second generation’ mobile licenses, which yielded payments in the region of just £40,000.