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Jean Tirole

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(Redirected from Jean M. Tirole) French professor of economics

Jean Tirole
Tirole in 2019
Born (1953-08-09) 9 August 1953 (age 71)
Troyes, France
Academic career
Field
InstitutionToulouse 1 University Capitole
Toulouse School of Economics
Ecole des hautes études en sciences sociales
Alma materMassachusetts Institute of Technology
Paris Dauphine University
École nationale des ponts et chaussées
École Polytechnique
Doctoral
advisor		Eric Maskin
Doctoral
students		Roland Bénabou
AwardsJohn von Neumann Award (1998)
BBVA Foundation Frontiers of Knowledge Award (2008)
Erwin Plein Nemmers Prize in Economics (2014)
Nobel Memorial Prize in Economics (2014)
Information at IDEAS / RePEc
Academic background
ThesisEssays in economic theory (1981)

Jean Tirole (born 9 August 1953) is a French economist who is currently a professor of economics at Toulouse 1 Capitole University. He focuses on industrial organization, game theory, banking and finance, and psychology. In particular, he focuses on the regulation of economic activity in a way that does not hinder innovation while maintaining fair rules. Tirole's work is largely theoretical and explored in mathematical models, not empirical research.

In 2014, he received the Nobel Memorial Prize in Economic Sciences for his analysis of market power and regulation.

Education

Tirole received engineering degrees from the École Polytechnique in 1976, and from the École nationale des ponts et chaussées in 1978.

He was appointed a member of the elite Corps of Bridges, Waters and Forests, later completing graduate studies at Université Paris Dauphine; he received a DEA degree in 1976, and a Doctorat de troisième cycle in decision mathematics in 1978. He received a Ph.D. in economics from the Massachusetts Institute of Technology in 1981, writing a thesis titled Essays in economic theory under the supervision of Eric Maskin.

He started thinking about studying economics when he was 21 years old, which he found both “very rigorous”, but at the same time “still a social science”. He said he found “a lot of that human aspect” in economics, which he found important.

Career

This section needs expansion. You can help by adding to it. (October 2014)
Toulouse School of Economics.

Tirole is chairman of the board of the Jean-Jacques Laffont Foundation at the Toulouse School of Economics, and scientific director of the Industrial Economics Institute (IDEI) at Toulouse 1 University Capitole. After receiving his doctorate from MIT in 1981, he worked as a researcher at the École nationale des ponts et chaussées until 1984. From 1984–1991, he was a professor of economics at MIT. His work by 1988 helped to define modern industrial organization theory by organising and synthesising the main results of the game-theory revolution vis-à-vis understanding of non-competitive markets.

From 1994 to 1996 he was a professor of economics at the École Polytechnique. Tirole was involved with Jean-Jacques Laffont in the project of creating a new School of Economics in Toulouse. He is Engineer General of the Corps of Bridges, Waters and Forests, Chair of the Board of the Toulouse School of Economics, and a visiting professor at MIT, and has been a professor "cumulant" at the École des hautes études en sciences sociales since 1995.

He was president of the Econometric Society in 1998 and of the European Economic Association in 2001. Around this time, he was able to determine a way to calculate the optimal prices for the regulation of natural monopolies and wrote a number of articles about the regulation of capital markets—with a focus on the differential of control between decentralised lenders and the centralised control of bank management. Tirole has been a member of the Académie des Sciences morales et politiques since 2011, the Conseil d'Analyse Économique since 2008 and the Conseil stratégique de la recherché since 2013. In the early 2010s, he showed that banks generally tend to take short-term risks and recommended a change in quantitative easing towards a more quality-based market stimulation policy.

Contributions to economics

Tirole's textbook, The Theory of Industrial Organization, synthesised modern models of oligopolistic competition, analysing various cases where industries consist of a small number of firms with significant market power. He and Oliver Hart published a paper showing the conditions in which a vertical merger can result in foreclosure. Rochet and Tirole analysed the implications of 2-sided markets for competition policy. Fudenberg and Tirole also created a taxonomy of strategic effects in oligopolistic competition models.

Tirole's 2014 Nobel Prize lecture was titled "The science of taming powerful firms" and explained his theories:

  • Competition is rarely perfect. Markets can fail and market power (firms’ ability to raise prices far above costs and/or offer low quality) must be kept in check. The number of companies in an industry only provides a rough indication of whether the market is competitive. As each industry is unique in how competition works, regulators should take a case-by-case approach. To enable this, economists should develop an in-depth analysis of an industry that accounts for what regulators do and don't know (creating policies that do not require information unlikely to be held by regulators), and join policy discussions. Policy makers, in turn, need to listen to economists.
  • Regulators must balance lowering prices for consumers with ensuring firms get a fair rate of return.
  • If a regulator forces an upstream monopoly to give all downstream operators "fair access" to their assets/services at the same price, this "fairness" can lead to consumers paying more than they should for less than they deserve. While downstream entities may compete "on a level playing field", the competition "dissipates" the profits that can be extracted for consumers. This results in low prices, however, these low downstream profits effectively cap the ability of the upstream firm to make a profit from its assets/services. Without the "fair access" restriction, the upstream firm would probably make mutually beneficial deals with selected downstream entities (eg by preferentially selling some better service to a higher bidding downstream operator). Thus, the upstream firm could use its exclusivity to give itself market power and profit from its asset/services.
  • Whether the regulator tolerates preferential behaviour is a defacto regulation on the rate of return of the upstream asset/services.
  • When an entity holds a monopoly, whether it should be allowed by regulators to get the benefit of its market power depends on whether it has achieved its monopoly fairly (eg due to its own risk taking, investment, innovation or efficiency) or unfairly (eg. by “political connections, wrong market design, or sheer luck”).
    • Regulators can gain insight into whether it was fairly acquired by looking at how companies acquired their assets (eg bidding on an auction) and whether their profits are tied to their own innovation/efficiency or factors out of their control. Regulators can gain further insight, despite firms having more information than regulators, by collecting data and benchmarking companies against similar companies operating in different markets. They can also gain insight by auctioning monopoly rights because in auctions, firms reveal information about industry costs by competing with one another.
    • Secondly, regulators can force companies into a kind of fairness by offering options in how firms are contracted. A cost-plus contract shelters firms from fluctuations in costs but has a fixed rate of return, while a fixed price contract makes firms take responsibility for costs (and incentivises lowering costs), but potentially offers a large windfall if costs can be minimised. However, with the latter there is the risk that firms will earn the windfall when costs turn out to be low for other reasons that have nothing to do with the efforts of the firm. An inefficient firm will prefer a cost-plus contract, and efficient firm will opt for a fixed price contract.
      • However, the fixed price contract, in making the firm responsible for costs, incentivises skimping on quality. Powerful incentives to reduce prices must go hand in hand with more thorough monitoring of quality.
      • The fixed price contract may also generate a high profit, which regulators may perceive via the information they now have. Regulators should not try to take these profits, even if encouraged by public opinion, as it destroys a firm's incentives to reduce costs.
      • Thus, powerful incentives requires commitment and an independent regulatory agency protected from the pressure of public opinion.
  • Regulation stops high market power from becoming high prices. But regulators have frequently not only set rules around price level, but also price structure. There they also face an information handicap, and the need for intervention is less obvious than in the case of the price level. Market power might dictate a desire for higher prices, but less so unfair price structures. Any regulation of price structure must be based on rigorous analysis and justification. Regulators have previous set price structures when they feared they lacked the information to set prices properly, however these were very inefficient price structures. But if the regulator can make use of decentralised information, a global price cap instead creates powerful incentives for a firm to be cost-efficient but also choose an efficient price structure.
  • Instead of trying to monitor that companies are doing right all the time, regulators should create incentives for companies to monitor themselves.
  • Regulators may want to cap prices, but price caps require companies to have low costs. Companies that cannot reduce costs may reduce quality instead. Since the regulator does not have the internal information of how much a company can reduce costs to set price caps, it is better off offering companies the option of a price cap or a cost-share with the regulator, as price caps will be preferred by companies that can reduce costs and cost-share will be preferred by ones that cannot.

Awards

Tirole was awarded the Nobel Memorial Prize in Economic Sciences in 2014 for his analysis of market power and the regulation of natural monopolies.

Tirole has also received:

He has also been a Sloan Research Fellow (1985) and a Guggenheim Fellow (1988). He was a fellow of the Econometric Society in 1986. He is a foreign honorary member of the American Academy of Arts and Sciences (1993) and of the American Economic Association (1993), and an Economic Theory Fellow (Society for the Advancement of Economic Theory) since 2011. In 2013 Tirole was elected an Honorary Fellow of the Royal Society of Edinburgh.

He is among the most influential economists in the world according to IDEAS/RePEc. Besides his numerous academic distinctions, he is a Chevalier de la Légion d'honneur since 2007 and an Officer in the Ordre national du Mérite since 2010.

Publications

Tirole has published about 200 professional articles in economics and finance, as well as 10 books, including The Theory of Industrial Organization, Game Theory (with Drew Fudenberg), A Theory of Incentives in Procurement and Regulation (with Jean-Jacques Laffont), The Prudential Regulation of Banks (with Mathias Dewatripont), Competition in Telecommunications (with Jean-Jacques Laffont), Financial Crises, Liquidity, and the International Monetary System, and The Theory of Corporate Finance. His research covers industrial organization, regulation, game theory, public economics, banking and finance, psychology and economics, international finance and macroeconomics.

Books

  • Dynamic Models of Oligopoly (with D. Fudenberg), 1986.
  • The Theory of Industrial Organization, MIT Press, 1988. Description and chapter-preview links.
  • Dynamic Models of Oligopoly (avec Drew Fudenberg, Harwood Academic Publishers GMbH, 1986.
  • Game Theory (with D. Fudenberg), MIT Press, 1991.
  • A Theory of Incentives in Regulation and Procurement (with J.-J. Laffont), MIT Press,1993. Description & chapter-preview links.
  • The Prudential Regulation of Banks (with M. Dewatripont), MIT Press,1994.
  • Competition in Telecommunications, MIT Press, 1999.
  • Financial Crises, Liquidity and the International Monetary System, Princeton University Press, 2002.
  • The Theory of Corporate Finance, Princeton University Press, 2005. Description. Association of American Publishers 2006 Award for Excellence.
  • Balancing the Banks (with Mathias Dewatripont, and Jean-Charles Rochet), Princeton University Press, 2010.
  • Inside and Outside Liquidity (with Bengt Holmström), MIT Press, 2011.
  • Théorie de l'organisation industrielle, Economica, 2015
  • Économie du bien commun, Presses universitaires de France, 2016
  • Economics for the common good, Princeton University Press; 2017

References

  1. Jean Tirole - Hyde Park Civilizace | Česká televize (in Czech), retrieved 12 July 2023
  2. Sveriges Riksbank's Prize in Economic Sciences in Memory of Alfred Nobel 2014., Sveriges Riksbank, 13 October 2014, retrieved 13 October 2014
  3. Biography of Jean Tirole Archived 18 October 2014 at the Wayback Machine
  4. "Essays in economic theory / by Jean Tirole". MIT Library catalog. Retrieved 13 October 2014.
  5. "Curriculum Vitae Jean TIROLE" (PDF). www.tse-fr.eu. Retrieved 12 August 2024.
  6. "Jean Tirole - Hyde Park Civilizace | Česká televize".
  7. ^ "Jean Tirole: Market Power and Regulation". Royal Swedish Academy of Sciences. 13 October 2014.
  8. Tirole, Jean (1988). The theory of industrial organization. The MIT Press. ISBN 9780262200714. OCLC 464151427.
  9. Rochet, Jean-Charles; Tirole, Jean (1 June 2003). "Platform Competition in Two-Sided Markets". Journal of the European Economic Association. 1 (4): 990–1029. doi:10.1162/154247603322493212. ISSN 1542-4766.
  10. "The Fat Cat Effect, the Puppy Dog Ploy and the Lean and Hungry Look" (PDF).
  11. Nobel Prize (8 December 2014). Lecture: 2014 Prize in Economic Sciences. Retrieved 30 January 2025 – via YouTube.
  12. (in Italian) Laurea magistrale honoris causa Jean Tirole Archived 2 May 2012 at the Wayback Machine
  13. "Professor Jean Marcel Tirole HonFRSE - The Royal Society of Edinburgh". The Royal Society of Edinburgh. Retrieved 1 February 2018.
  14. "Economist Rankings at IDEAS". Retrieved 15 October 2014.
  15. Fudenberg, Drew; Tirole, Jean (11 June 2018). Dynamic Models of Oligopoly. Routledge. ISBN 9780415269179 – via Google Books.
  16. Fudenberg, Drew; Tirole, Jean. "Game Theory". The MIT Press.
  17. Dewatripont, Mathias; Tirole, Jean. "The Prudential Regulation of Banks". The MIT Press.
  18. Laffont, Jean-Jacques; Tirole, Jean. "Competition in Telecommunications". The MIT Press.
  19. Tirole, Jean (21 July 2002). Financial Crises, Liquidity, and the International Monetary System. Princeton University Press. ISBN 9780691099859.
  20. Dewatripont, Mathias; Rochet, Jean-Charles; Tirole, Jean; Tribe, Keith (2010). Balancing the banks: global lessons from the financial crisis. Princeton: Princeton University Press. ISBN 978-1-4008-3464-8. OCLC 642206030.
  21. Holmström, Bengt; Tirole, Jean. "Inside and Outside Liquidity". The MIT Press.
  22. "Book Review: Economics for the Common Good by Jean Tirole". LSE Review of Books. 9 July 2018. Retrieved 13 August 2022.

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Awards
Preceded byEugene F. Fama
Lars Peter Hansen
Robert J. Shiller 		Laureate of the Nobel Memorial Prize in Economics
2014 		Succeeded byAngus Deaton
Laureates of the Sveriges Riksbank Prize in Economic Sciences
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