Two American economists won the Nobel Prize for improving how auctions work, research that underlies much of today’s economy — from the way Google sells advertising to the way telecoms companies acquire airwaves from the government.
The discoveries of Paul R. Milgrom and Robert B. Wilson, both of Stanford University, “have benefitted sellers, buyers and taxpayers around the world,” the Nobel Committee said.
Wilson was once Milgrom’s Ph.D. adviser, and the two also happen to be neighbors. Reached by phone at his home in California, Milgrom said he received news of their win “in a strange way.”
“I got a knock at my door from Bob Wilson,” he told The Associated Press.
Milgrom, 72, said students, friends and colleagues had long suggested he and Wilson, 83, might be due for the prize.
“It’s nice to have their respect but their affection as well,” he said.
Technically known as the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, the award was established in 1969 and is now widely considered one of the Nobel prizes.
The two men tackled the tricky problem of making auctions work efficiently. The committee said Wilson’s work showed “why rational bidders tend to place bids below their own best estimate of the common value.”
The effects of their work can be seen all around. “Online advertising is sold at auction,” said David Warsh, who tracks economic research at his blog Economic Principals. “That Google was able to