A pair of Stanford University economists will share the 2020 Nobel Prize in Economic Sciences, the Royal Swedish Academy of Sciences announced today.
Paul Milgrom, 72, and Robert Wilson, 83, have been awarded the Sveriges Riksbank Prize in Economic Sciences for "improvements to auction theory and inventions of new auction formats," according to a press release. The award also comes with 10 million Swedish kronor, equivalent to about $1.1 million.
Milgrom and Wilson are known for research and teaching on auction market design, pricing, negotiations and topics concerning industrial organization and information economics. They have played an important role in auction designs and competitive bidding strategies for the communications, oil and power industries, and in the design of innovative pricing schemes. Wilson has also influenced a generation of younger economists, including Milgrom, Stanford University said in a press release.
"They have also used their insights to design new auction formats for goods and services that are difficult to sell in a traditional way, such as radio frequencies … Their discoveries have benefited sellers, buyers and taxpayers around the world," the Royal Swedish Academy of Sciences stated.
Milgrom is the founding director of the Stanford Institute for Theoretical Economics and is director of the Program on Market Design at the Stanford Institute for Economic Policy Research. Wilson is a professor emeritus at the Stanford Graduate School of Business. They shaped the modern telecommunications industry, which arose from an auction format they developed, along with American economist Preston McAfee.
"The prize to Wilson and to Milgrom gives just recognition to one of the most important and successful applications of economic theory: auctions and auction design. But their influence on what we do and how we think in microeconomics, especially applied to the study of management, goes well beyond auctions. Their impact on business schools and business school curricula cannot be overestimated," David Kreps, an economist at Stanford's business school, stated in the university's press release.
Milgrom's dissertation research during the 1970s under Wilson formed the theory of auctions when bidders have "differential information about the value of an object being sold," according to the release. He pioneered research on the design of auctions for large-scale problems where many bidders may be competing for many different types of goods, according to the university.
He is also known for work on the economics of incentives and management, game theory and information economics, for developing one of the standard models of the microstructure of financial markets, and for multiple contributions to mathematical economics.
In 1996, he co-founded a consulting company to design markets for commodities such as diamonds, timber, electricity, natural gas and radio spectrum and another company in 2009 to provide software solutions for conducting multiproduct auctions.
He was elected to the American Academy of Arts and Sciences in 1992 and the National Academy of Sciences in 2006 and received the 2008 Nemmers Prize in economics.
Wilson is best known for applying theories about auctions to real-world market problems, the university said. He worked with the U.S. Department of the Interior on policies for auctioning leases for oil exploration in the 1970s. Wilson later created an auction system for the sale of industrial chemicals. He and Milgrom designed the 1993 Federal Communications Commission spectrum auction.
He also designed portions of the markets conducted by the Power Exchange, an auction system for the sale of electricity and reserve generation capacity that was used in California after the state deregulated its electric power industry in 1998 and contributed to designs used by the California and New England power-system operators.
He joined the Stanford Graduate School of Business faculty in 1964 and was director of Stanford's Center on Conflict and Negotiation in 1990 and Institute of Theoretical Economics from 1993 to 1995. In 1994, he was inducted into the National Academy of Sciences in 1994. Wilson received the Stanford Business School PhD Faculty Distinguished Teaching Award in 2001 and was named a Distinguished Fellow of the American Economic Association in 2006.
In 2018, Milgrom and Wilson were jointly awarded the 2018 John J. Carty Award for the Advancement of Science with Kreps.
Milgrom and Wilson are the 18th and 19th living Nobel laureates at Stanford, the university said.