Relevance Rewarded

Late last fall, French economist Jean Tirole was awarded the 2014 Nobel Memorial Prize in Economic Science.
Relevance Rewarded

Tirole is president of the Toulouse School of Economics and scientific director of the Institut d’Économie Industrielle.

He was recognized for his work in determining how analysts and policymakers can understand and regulate industries with monopolies or a few powerful firms. According to the official press release, “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.”

Tirole considered how governments should regulate monopolies and showed that policy rules that apply in some market situations—such as capping prices and prohibiting price cooperation between competitors— might be bad approaches for industries where a few large players hold sway. He proposed that the best regulation policies should be adapted to each individual sector. While his work is grounded in theory, it has sweeping practical relevance and has been used to regulate industries from credit to telecommunications.