Former INFORMS member shares 2020 Nobel Prize in Economics

Stanford University professors Paul Milgrom (far right) and Robert B. Wilson received the 2020 Nobel Memorial Prize in Economic Sciences “for improvements to auction theory and inventions of new auction formats.”

Milgrom, a former INFORMS member who sits on the board of the INFORMS Auctions and Market Design Section, led the team that designed the 2016-17 “Incentive Auction” to repurpose radio spectrum from broadcast television to wireless internet on behalf of the U.S. Federal Communications Commission. The auction yielded $19.8 billion in revenue, including $10.05 billion for winning broadcast bidders and more than $7 billion to the U.S. Treasury. INFORMS recognized the project in 2018 by presenting the FCC with its prestigious Franz Edelman Award for Achievement in Advanced Analytics, Operations Research and Management Science.

In its Oct. 12 announcement, the Nobel Prize Committee wrote, “For five decades – and still counting – this year’s Laureates in Economic Sciences have produced research results that have deepened our understanding of how auction markets function in the presence of private information. Their findings have allowed trained analysts to design new auctions and practitioners to choose more wisely among existing auction formats. Milgrom and Wilson have brought theory and practice tightly together, as few other economists have done. In sum, their research on auction theory and auction design has been instrumental in gradually replacing a process of intuitive trial and error with a more rigorous scientific approach.”

The Prize Committee also noted that “Milgrom formulated a more general theory of auctions that not only allows common values, but also private values that vary from bidder to bidder. He analyzed the bidding strategies in a number of well-known auction formats, demonstrating that a format will give the seller higher expected revenue when bidders learn more about each other’s estimated values during bidding.”