Nobel
Prize 2014 | Nobel Prize in Medicine 2014
| Nobel Prize in Physics 2014 | Nobel Prize in Chemistry 2014 | Nobel
Prize in Literature 2014 | Nobel Prize in Physiology 2014 | Nobel Prize
in Economics 2014 | Nobel Prize in Peace 2014
The Prize in Economic Sciences 2014 to Jean Tirole for his analysis of market power and regulation.
Jean Tirole is one of the most influential economists of our time. He has made important the oretical research contributions in a number of areas, but most of all he has clarified how to understand and regulate industries with a few powerful firms.
Many industries are dominated by a small number of large firms or a single monopoly. Left unregulated, such markets often produce socially undesirable results prices higher than those motivated by costs, or unproductive firms that survive by blocking the entry of new and more productive ones.
From the mid-1980s and onwards, Jean Tirole has breathed new life into research on such market failures. His analysis of firms with market power provides a unified theory with a strong bearing on central policy questions: how should the government deal with mergers or cartels, and how should it regulate monopolies?
Before Tirole, researchers and policymakers sought
general principles for all industries. They advocated
simple policy rules, such as capping prices for monopolists and prohibiting cooperation between competitors,
while permitting cooperation between firms with
different positions in the value chain. Tirole showed
theoretically that such rules may work well in certain
conditions, but do more harm than good in others.
Price caps can provide dominant firms with strong
motives to reduce costs a good thing for society but may also permit excessive profits a bad thing for
society. Cooperation on price setting within a market
is usually harmful, but cooperation regarding patent
pools can benefit everyone. The merger of a firm and
its supplier may encourage innovation, but may also
distort competition.
The best regulation or competition policy should
therefore be carefully adapted to every industry’s specific conditions. In a series of articles and books, Jean
Tirole has presented a general framework for designing such policies and applied it to a number of industries, ranging from telecommunications to banking.
Drawing on these new insights, governments can better
encourage powerful firms to become more productive
and, at the same time, prevent them from harming
competitors and customers.
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Jean Tirole is one of the most influential economists of our time. He has made important the oretical research contributions in a number of areas, but most of all he has clarified how to understand and regulate industries with a few powerful firms.
Many industries are dominated by a small number of large firms or a single monopoly. Left unregulated, such markets often produce socially undesirable results prices higher than those motivated by costs, or unproductive firms that survive by blocking the entry of new and more productive ones.
From the mid-1980s and onwards, Jean Tirole has breathed new life into research on such market failures. His analysis of firms with market power provides a unified theory with a strong bearing on central policy questions: how should the government deal with mergers or cartels, and how should it regulate monopolies?
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