Every successful internet-era Silicon Valley business model can be traced back to a model from game theory.

Lloyd Shapley wrote his paper on matching markets (with David Gale) in 1962. He received the Nobel Prize in 2005, the year Tinder came on the market.

Oliver Beige
Oct 18, 2020
Photo by Carl Raw on Unsplash

William Vickrey wrote his first paper on auction theory in 1961, for which he won the Nobel Prize in 1996. Google (and Yahoo!) started implementing Vickrey auctions for ad markets around 2002.

George Akerlof finally got his Lemons Markets paper published in 1970. He won the Nobel in 2001, along with Spence and Stiglitz. SV startups using reputation engines to overcome information asymmetries are to numerous to fit into 280 characters.

Joe Stiglitz (1975) and Michael Spence (1973) proposed solutions to Akerlof’s information asymmetry problem, “screening” and “signaling”, which were applied in 1993 as a solution against DoS attacks and email spam. The solution is now known as “Proof of Work”.

Robert Aumann’s correlated equilibrium from 1974 is the piston engine that fires every two-sided market platform there is. His subjective Aumann device is an imperfect oracle. For this he shared the 2005 Nobel with Thomas Schelling, 3+ years before Uber and Airbnb kicked off.

Two-sided market platforms, described by Jean Tirole (NL 2014) with J-C Rochet in 2003 are just matching markets (Shapley 1962, Roth 2984, both NL 2012) with recommender systems (Spence 1973, NL 2001) and dispute resolution mechanisms (Williamson 1975, NL 2009).

Oliver Beige

I write about how technology shapes the world we live in.