Nobel Prize to Milgrom and Wilson. Thanks to Them, We Understand How Markets Really Work
Marco Ottaviani, Professor of Economics at Bocconi, comments on the 2020 Nobel Prize for Economics
It all started when Wilson, in the 60s, "was a researcher in applied mathematics and in that field he worked on information in auctions together with one of his students, Paul Milgrom, analyzing the phenomenon of the winner's curse", explains Marco Ottaviani, Professor of economics at Bocconi University. "According to this phenomenon, when you win an auction it means that the others who competed did not consider it appropriate to offer more. This means that, probably, the good was not worth what the winner thought it was worth. This aspect must be taken into account". This is a fundamental observation that Wilson and Milgrom then applied to the radio frequency market. Thanks to the market rules they helped to design "the market has become more efficient. They really are leaders who have shown the world how rigorous mathematical analysis can be combined with an important real problem".