Oak Park, Michigan
Paul Robert Milgrom was born on April 20, 1948, in Detroit, the second of four sons of Abraham Isaac Milgrom and Anne Lillian Milgrom, née Finkelstein. His father was born in Canada to Polish-Jewish immigrants and his mother in Detroit to Ukrainian-Jewish immigrants. The family lived in Oak Park, a Detroit suburb, where Paul went to the John Dewey School and Oak Park High School, graduating in 1966.
Encouraged by his maths teacher, Mr Habermas, he attended the Ross summer mathematics programme at Ohio State University in 1965 and finished first in his class. As a teenager he loved maths puzzles and chess and was active in youth groups in the local Jewish community. At the University of Michigan he was bored by classes outside his major, earned unimpressive grades and, he recalls, dropped physics because the 8 a.m. lecture was across campus in the Michigan winter. He graduated in mathematics in 1970.
An actuary turns economist
Milgrom followed a girlfriend to California and took a job as an actuarial trainee with Metropolitan Life in San Francisco, then moved to the Nelson and Warren actuarial consultancy in Columbus, Ohio. There he published two prize-winning theoretical papers in the Transactions of the Society of Actuaries and became a fellow of the Society in 1974. It was in Columbus, he later wrote, that he discovered his inclination to do theoretical research on practical problems, and it was there that he met Jan Thurston, whom he married.
In 1975 he went to Stanford to study for an MBA, but a professor who saw his mathematical talent urged him to switch to a doctorate. A fellow student, Bengt Holmström, gave him advice he followed: get Robert Wilson as your adviser. Milgrom wrote a term paper extending Wilson’s work on auctions; Wilson told him it could be the heart of his dissertation. He earned an M.S. in statistics in 1978 and a Ph.D. in 1979, the start of a lifelong partnership with Wilson.
Game theory comes of age
Milgrom’s first academic job was at Northwestern’s Kellogg School, alongside Roger Myerson, Holmström, Robert Weber and John Roberts, a group determined to bring game theory with incomplete information into the centre of economics. With Weber he wrote a landmark 1982 paper on auctions, showing how bidders’ private information gets reflected in prices and how the seller’s revenue depends on the rules; it introduced the linkage principle, which explains why auctions that reveal more information tend to raise more money. With Nancy Stokey he proved the no-trade theorem, and with Lawrence Glosten he wrote a paper that helped found the modern study of how stock markets’ trading rules affect prices.
With David Kreps, Roberts and Wilson he showed how people can rationally build reputations, explaining why players in repeated games cooperate far more than older theory predicted. With Holmström at Yale, where he held a chair from 1982, he developed the multitask theory of incentives, which warns that rewarding easily measured work, such as students’ test scores, can lead people to neglect important work that is hard to measure. In 1987 he returned to Stanford, where he is the Shirley and Leonard Ely Professor of Humanities and Sciences.
Selling the airwaves
For decades the U.S. government had handed out radio spectrum licenses through hearings and later lotteries, which left mobile operators with patchwork networks and let speculators pocket billions that might have gone to taxpayers. In 1993 Congress authorized the Federal Communications Commission to auction the licenses instead. The challenge was formidable. A phone company’s license for one city is worth more if it can also win neighbouring cities, so selling licenses one at a time, as an auction house would, forces bidders to guess at prices still to come.
Milgrom and Wilson, advising Pacific Bell, framed the problem as one of price discovery. Drawing partly on his experience of charity silent auctions, where everything is on sale at once, Milgrom and Wilson designed the simultaneous multiple round auction. All licenses are offered at the same time, bids are made in rounds, the auction ends only when a round passes with no new bids, which defeats last-second sniping, and an activity rule of Milgrom’s invention stops bidders from holding back and forces the auction forward. When critics said the design was too novel, Milgrom demonstrated a working version built in Excel spreadsheets. The FCC adopted it; its order cited him by name more than a hundred times.
Hundreds of billions for the public
The first auction using the new format, in July 1994, sold ten licenses in 47 rounds for 617 million dollars, licenses the government had previously given away almost free. According to the Royal Swedish Academy of Sciences, Finland, India, Canada, Norway, Poland, Spain, the United Kingdom, Sweden, Germany and others adopted the same format; FCC auctions using it raised more than 120 billion dollars between 1994 and 2014, and worldwide the mechanism has generated more than 200 billion dollars from spectrum sales. The format has also been used to sell electricity and natural gas. Milgrom later helped develop the combinatorial clock auction, which lets bidders bid on packages of licenses and has become the second most common family of spectrum auctions.
Beyond the money, these auctions put the airwaves in the hands of companies that valued them most and could build networks with them, speeding the spread of mobile phones and wireless data. The Nobel committee summed it up: Milgrom and Wilson’s discoveries have benefited sellers, buyers and taxpayers around the world.
The most complicated auction in history
Milgrom’s greatest design challenge came after 2012, when Congress told the FCC to buy back television broadcast rights, repack the remaining stations into fewer channels, and sell the freed airwaves for mobile broadband, all in one linked process. The FCC asked Milgrom to assemble a team through his company, Auctionomics, to design it. Checking whether a set of stations could fit into a set of channels was a notoriously hard computing problem, with more than a million constraints, and the auction had to solve thousands of them. With the computer scientist Kevin Leyton-Brown and the economist Ilya Segal, Milgrom’s team built algorithms and rules that worked even when some problems could not be solved in time.
The broadcast incentive auction, the first of its kind in the world, ran from March 2016 to 2017. It raised about 19.8 billion dollars from wireless carriers, paid more than 10 billion dollars to 175 broadcasters who gave up or moved their channels, with much of the rest going to the U.S. Treasury, and freed 84 megahertz of spectrum: 70 for mobile broadband and 14 for wireless microphones and unlicensed use. In 2024 Auctionomics received a technical Emmy Award for its contributions to spectrum auction design.
Market design
With Alvin Roth, who had redesigned the matching system for new doctors, Milgrom taught the first graduate course in market design at Harvard and MIT in 2000 and 2001, helping launch a new field that uses economics to build better markets. With John Hatfield he showed how auction algorithms and matching algorithms like the medical residency match are connected. He has consulted for companies and governments on auctions for radio spectrum, electrical power, internet advertising and agricultural commodities, and co-wrote a widely used textbook on organizations with John Roberts. He has said that he now devotes more of his time to training students, and that seeing the sexist treatment his daughter faced in graduate school inspired him to focus on training women economists at Stanford.
Family and Jewish roots
Milgrom’s grandparents were Jewish immigrants from Poland and Ukraine, and he grew up active in the Jewish community of suburban Detroit. The Jewish Virtual Library includes him among Jewish Nobel laureates. He has two children with Jan Thurston, Joshua and Elana, and a grandson. In 1995 Jan suffered a brain injury that left her seriously disabled; the marriage did not survive, but he wrote in 2020 that she will always be part of his family, that they still had dinner together every Tuesday, and that he manages her welfare and finances.
In 1996 he lectured in Stockholm in honour of the auction theorist William Vickrey, who had died days after being named a laureate. At the Nobel banquet he was seated next to Eva Meyersson, who lived in Stockholm; he later offered to fly her anywhere in the world to meet him, and they married in 2000. When asked at a 2006 press conference how he felt about not having won the prize, he replied that he was the one who had gone home with the biggest prize. In 2020 he and Wilson, his former adviser and Stanford neighbour, shared the Nobel Memorial Prize in Economic Sciences for improvements to auction theory and inventions of new auction formats.
Legacy
Milgrom turned auction theory from an elegant branch of game theory into a working technology. The rules he helped write govern how governments around the world sell the public airwaves that carry phone calls, video and data, and they have returned enormous sums to taxpayers that would once have gone to speculators. His career is a long demonstration of the habit he discovered as a young actuary in Columbus: doing deep theoretical research on practical problems.
Sources & further reading
Paul R. Milgrom, Biographical, NobelPrize.org · Popular information: The Prize in Economic Sciences 2020, NobelPrize.org · FCC announces results of world’s first broadcast incentive auction, TelecomTV · Paul Milgrom, Jewish Virtual Library · Paul Milgrom, Wikipedia · Researched from the sources above and checked against them. Spotted an error? Tell us.
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