“Nobel Prize in Economics for Wilson and Milgrom was to be expected”

Robert Wilson and Paul Milgrom received the Nobel Prize in Economics for their work on auction theory. “That was to be expected,” says Tilburg game theorist Eric van Damme, who predicted it fifteen years ago.

In an article in Economisch Statische Berichten (Economic Statistical Reports), he concluded with Maarten Janssen in 2005: “We predict that within ten years or so the committee will recognize contributions from game theory to concrete market design, with people like Robert Wilson and Paul Milgrom (auction design) and Alvin Roth (matching markets).” They were quite right about that. Although Wilson and Milgrom had to wait until this year for their prize, Roth already received it in 2012.

Last year Van Damme also ended an article on the Nobel prizes for game theory with the remark that an award for auction theory is to be expected. It’s obvious, he now says: “Those are the things you know will come one day. You just don’t know when. And these two people are obvious for this too.”

What makes the prize so beautiful for Robert Wilson is that he himself has already supervised several Nobel Prize winners as PhD researchers, says Van Damme. Among them is his fellow laureate Paul Milgrom. But the aforementioned Alvin Roth and, for example, 2016 winner Bengt Holmström also had him as their PhD thesis supervisor.

“Wilson is a very friendly, modest man who always stays a little in the background. He is also incredibly intelligent. He is very broad, but he can also very much go into depth. He has been able to inspire and motivate so many people. That’s what makes it so much fun that he’s now received this prize; it’s ultimately also a recognition for Wilson.”

Valorization

Whereas the older Wilson (1937) seems to be the personification of Bildung in science, the younger Milgrom (1948) is the personification of valorization. Van Damme: “Milgrom is someone who is very visible and very much seeks the limelight. He has done a lot in the academic field, but he has also pushed hard to get the applications of the ideas implemented. I even think he applied for a patent, but I don’t know if he ever got one.”

Auction theory

Wilson and Milgrom laid the foundation and also contributed to the development of more complex auctions, for example, for abstract rights. Such as auctions for mobile frequencies, emission rights, landing rights for aircrafts, or government bonds. Van Damme: “Fantastic how they did it. It was a great collaboration between economists and computer scientists in which they designed a model with which we can go ahead for years to come”.

With rights auctions, governments have raised billions time and time again. But according to the Tilburg game theorist, they also deserve praise for having had the guts to do so. “The people responsible for policy had to be prepared to play and take the risks. It was customary to assign rights to parties. An auction does not guarantee that those rights reach the right people or that it always generates greater returns.”

Translated by Language Center, Riet Bettonviel

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