[22] Milgrom received the Erwin Plein Nemmers Prize in Economics in 2008 "for contributions dramatically expanding the understanding of the role of information and incentives in a variety of settings, including auctions, the theory of the firm, and oligopolistic markets.

The Royal Swedish Academy of Sciences stated that it awarded the Nobel Memorial Prize jointly to Milgrom and Wilson because they "used their insights to design new auction formats for goods and services that are difficult to sell in a traditional way, such as radio frequencies.

In response, Milgrom and Wilson invented new formats for auctioning off many interrelated objects simultaneously, on behalf of a seller motivated by broad societal benefit rather than maximal revenue.

His work with John Roberts and Chris Shannon advanced the use of supermodularity as a property of individuals' preferences that can yield general monotonicity results in economic analysis.

Indeed, they show that their concept of quasi-supermodularity (a generalization of supermodular function) along with the single-crossing property, is necessary and sufficient for comparative statics to obtain on arbitrary choice sets.

The key insight in the Holmstrom-Milgrom paper is that simple linear incentive schemes can become optimal when the agent can monitor the evolution over time of the performance measures on which his compensation will be based.

Such a linear compensation scheme imposes a "uniform incentive pressure" on the agent, leading him to choose a constant drift for each dimension of the Brownian process.

Milgrom's persuasion game has been hugely influential in the study of financial accounting as a tool for understanding the strategic response of management to changes in disclosure regulation.

In an influential paper, Milgrom and Roberts (1994) applied the framework of thinking about change of a system of complements to tackle some key issues in organizational economics.

Milgrom and Roberts used the same theory to forecast the difficulties Japanese businesses would have in adjusting to change in the decade and a half following the recession that began in the early 1990s; a prediction that was borne out by subsequent experience.

However, it was primarily in the 1980s and largely due to the Milgrom-Roberts contributions in applying incomplete information game theory to industrial organization problems that these ideas were adopted into the mainstream of the field.

In this context, by repeatedly fighting rivals with low prices, a predator increases its reputation for "toughness"; and thus encourages exit and discourages future entry.

Milgrom made early contributions to the growing literature applying game theoretic models to our understanding of the evolution of the legal institutions of the market economy.

Milgrom, Douglass North and Barry Weingast (1990) presents a repeated game model that shows the role for a formal institution that serves as a repository of judgments about contract behavior to coordinate a multilateral reputation mechanism.

The paper beings with the observation that long-distance trade in the somewhat chaotic environment of the Middle Ages exposed traveling merchants to the risk of attack, confiscation of goods and unenforced agreements.

A key insight from the paper is that neither bilateral nor multilateral reputation mechanisms can support the incentives of a ruler to protect foreign merchants as trade reaches an efficient level.

The threat is, thus, insufficient to deter a ruler from confiscating goods or to encourage their expenditure of resources or political capital to defend foreign merchants against local citizens.

These insights have been built on to explore more generally the role of legal institutions in coordinating and incentivizing decentralized enforcement mechanisms like the multilateral reputation system.

This early model laid the groundwork for future work on strategic information behavior in courts Shin (1998)[60] and Daughter and Reinganum (2000)[61] relax the symmetry assumption, for example, looking at the impact of sequential evidentiary search decisions or Bayesian inference by judges; Froeb and Kobayashi (1996)[62] and Farmer and Pecorino (2000)[63] investigate the role of evidentiary costs and alternative models of judicial inference; Che and Severinov (2009)[64] explore a role for lawyers who are better informed about the legal significance of evidence and can advise their clients about to reveal in court.

The problem, according to Shimer is that this mechanism sets into motion a negative feedback loop which in the end largely cancels firms' incentive to expand employment.

That puzzle can loosely be paraphrased as follows: "what modification to the DMP framework is needed to put it in line with the empirical evidence that employment rises sharply during a business cycle expansion?"

Milgrom, together with Robert Wilson, Preston McAfee, and John McMillan, played a role in designing the simultaneous multiple round auction that was adopted and implemented by the FCC.

In the words of Evan Kwerel, "In the end, the FCC chose an ascending bid mechanism, largely because we believed that providing bidders with more information would likely increase efficiency and, as shown by Milgrom and Weber (1982), mitigate the winner's curse.

In the early 2000s, together with Alvin E. Roth, Milgrom taught the first graduate course on Market Design, which brought together topics on auctions, matching, and other related areas.

Under the rational choice approach, one would begin by specifying the relevant preferences over economic outcomes (e.g. everyone likes to consume more, some people might not like inequality, and so on), then model the allocation of resources under alternative policies and finally compare policies by looking at preferences over the alternative outcomes.Many of the "objectionable" simplifying features of the rational choice model combine to make such an analysis feasible.

Often, it is precisely these simplifications – that preferences are fundamental, focused on outcomes, and not too easily influenced by one's environment and that people are generally to reason through choices and act according to their preferences – that allow economic analysis to yield sharp answers to a broad range of interesting public policy questions.The behavioral critiques we have just discussed put these features of the rational choice approach to policy evaluation into question.

A crucial question then is whether an alternative model - for example an extension of the rational choice framework that incorporates some of these realistic features – would be a better tool for policy analysis.

Developing equally powerful alternatives is an important unresolved question for future generations of economists.Milgrom has been involved for at least two decades in the design and practice of large-scale auctions.

"[76] In the words of the Economist[77]: In the run-up to an online auction in 2006 of radio-spectrum licences by America's Federal Communications Commission, Paul Milgrom, a consultant and Stanford University professor, customised his game-theory software to assist a consortium of bidders.

Two of his clients, Time Warner and Comcast, paid about a third less than their competitors for equivalent spectrum, saving almost $1.2 billion.In 2007, Milgrom co-founded Auctionomics,[4] with Silvia Console Battilana,[78] to design auctions and advise bidders in different industries.