It was in the middle of the night and the Nobel Prize committee couldn’t reach their 2020 economic sciences winner, Detroit-born professor Paul R. Milgrom.
Luckily, Milgrom’s co-winner is also his neighbor.
According to Stanford University, where the winning duo currently teaches, Robert B. Wilson trekked to Milgrom’s house in the middle of the night, knocking incessantly to tell him the good news.
Start the day smarter. Get all the news you need in your inbox each morning.
You can watch that moment, and the Michigan-raised winner’s stunned reaction, below.
Milgrom was born in Detroit in 1948. He graduated Oak Park High School and went on to complete his bachelor’s degree in mathematics at the University of Michigan, Ann Arbor.
He and Wilson won for their improvements to auction theory and inventions of new auction formats. According to the Nobel Prize, “(t)heir discoveries have benefitted sellers, buyers, and taxpayers around the world.”
So…what is auction theory?
People are usually selling things to the highest bigger and buy from the cheapest offer. But the price of an auctioned object — whether it is an art or an antique — changes wildly from auction to auction, the Nobel Prize release explained.
Milgrom and Wilson studied how auctions work, which is difficult because there are so much factors to take in, especially the bidder’s behavior. They focused on things that are a little harder to auction, like securities, minerals and energy.
Wilson’s theory talked about the winner’s curse, the fear of paying too much and losing out. This is why most people tend to bid under the value of an object.
Milgrom created a theory that shows that sellers tend to make more money when the bidders know more about their fellow bidder’s estimated values placed on the objects. This format would benefit sellers more.
Their new auction formats make it easier to sell complex objects.
According to Stanford’s news release, the two are credited for “shaping the entire modern telecommunications industry.” In 1994, the United States used their format to sell radio frequencies to telecom operators. Since then, many other countries have done the same.
“This year’s Laureates in Economic Sciences started out with fundamental theory and later used their results in practical applications, which have spread globally. Their discoveries are of great benefit to society,” Peter Fredriksson, chair of the Prize Committee said.
Milgrom is also Wilson’s third student to have won a Nobel Prize.
The winners will share 10 million Swedish kronor, which amounts to $1,135,935.
Become a subscriber here.
This article originally appeared on Detroit Free Press: Detroit-born economist Paul Milgrom wins Nobel Prize in economic sciences