Jean Tirole facts for kids

Quick facts for kids Jean Tirole
Tirole in 2019
Born	(1953-08-09) 9 August 1953 (age 72) Troyes, France
Institution	Toulouse 1 University Capitole Toulouse School of Economics Ecole des hautes études en sciences sociales
Field	Microeconomics Game theory Industrial organization
Alma mater	Massachusetts Institute of Technology Paris Dauphine University École nationale des ponts et chaussées École Polytechnique
Doctoral advisor	Eric Maskin
Doctoral students	Roland Bénabou
Awards	John 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

Jean Tirole, born on August 9, 1953, is a famous French economist. He teaches economics at Toulouse 1 Capitole University. He studies how businesses work, how people make decisions (game theory), and how banks and money systems operate. He also looks at how to set rules for businesses so they can still invent new things but also play fair. His work uses lots of math and ideas, not just looking at real-world numbers.

In 2014, he won the Nobel Memorial Prize in Economic Sciences. He got this award for his ideas on how big companies use their power and how governments can make rules for them.

Jean Tirole's Education

Jean Tirole earned engineering degrees in France. He graduated from the École Polytechnique in 1976. Then, he finished his studies at the École nationale des ponts et chaussées in 1978.

He also studied at Paris Dauphine University. There, he received a special master's degree in 1976. In 1978, he earned a doctorate in decision mathematics. He then went to the Massachusetts Institute of Technology (MIT) in the United States. He received his Ph.D. in economics from MIT in 1981. His Ph.D. paper was about economic theory.

Tirole started thinking about economics when he was 21. He found it to be a very strict subject. But he also saw it as a social science. He felt that economics had a lot of human aspects, which he thought was important.

Jean Tirole's Career Journey

Toulouse School of Economics.

Jean Tirole is a leader at the Toulouse School of Economics. He is the chairman of the board for the Jean-Jacques Laffont Foundation. He also directs the Industrial Economics Institute (IDEI) at Toulouse 1 University Capitole. After getting his Ph.D. from MIT in 1981, he worked as a researcher. He was at the École nationale des ponts et chaussées until 1984.

From 1984 to 1991, he was an economics professor at MIT. By 1988, his work helped shape how we understand modern industrial organization. He brought together ideas from game theory. This helped explain how markets work when there isn't perfect competition.

From 1994 to 1996, he taught economics at the École Polytechnique. Tirole helped create the new Toulouse School of Economics. He is an Engineer General in the Corps of Bridges, Waters and Forests. He also visits MIT as a professor. Since 1995, he has been a professor at the École des hautes études en sciences sociales.

He led the Econometric Society in 1998. He also led the European Economic Association in 2001. Around this time, he found a way to figure out the best prices for regulating natural monopolies. He also wrote many papers about rules for money markets. He focused on how banks are controlled.

In the early 2010s, he showed that banks often take short-term risks. He suggested changing how money is put into the economy. He thought it should focus more on quality, not just quantity.

Jean Tirole's Economic Ideas

Tirole wrote a textbook called The Theory of Industrial Organization. This book brought together new ideas about how a few big companies compete. It looked at different situations where industries have only a few powerful firms. He and Oliver Hart wrote a paper. It showed when a merger between companies at different stages of production could block others. Rochet and Tirole studied how two-sided markets affect competition. Fudenberg and Tirole also created a way to group different strategies in competition models.

Taming Powerful Companies

Tirole's 2014 Nobel Prize speech was called "The science of taming powerful firms." He explained his ideas in it:

• Competition is rarely perfect in markets. Sometimes, markets don't work well. Big companies can charge very high prices or offer low quality. This "market power" needs to be controlled. Just counting how many companies are in an industry doesn't tell you if it's competitive. Every industry is different, so rules should be made case by case. To do this, economists should study industries deeply. They need to think about what rule-makers know and don't know. This helps create rules that don't need information that is hard to get. Economists should also join talks about these rules. Rule-makers, in turn, need to listen to economists.
• Rule-makers must find a balance. They need to lower prices for customers. But they also need to make sure companies earn a fair amount of money.

Monopolies in Single-Sided Markets

• Imagine one company (a monopoly) controls something important. If rule-makers force this company to give all other businesses "fair access" at the same price, it sounds good. But this "fairness" can sometimes make customers pay more for less. Even if other businesses compete fairly, the profits they can make from customers might disappear. This leads to low prices, but it also limits how much the monopoly can earn from its assets. Without this "fair access" rule, the monopoly might make special deals. It could sell better services to businesses that pay more. This way, the monopoly could use its special position to make more money.
• Whether rule-makers allow special deals affects how much the monopoly can earn.
• When a company has a monopoly, rule-makers decide if it should benefit from its power. This depends on how it got the monopoly. Was it through hard work, new ideas, or taking risks? Or was it through unfair ways, like political connections or just luck?
  • Rule-makers can find out if market power was gained fairly. They can look at how companies got their assets, like by bidding in an auction. They can also see if profits come from new ideas or from things outside the company's control. Even if companies know more than rule-makers, data can help. Rule-makers can compare companies to similar ones in different markets. They can also auction off monopoly rights. In auctions, companies show how much things cost by competing.
  • Another way rule-makers can ensure fairness is by offering different types of contracts. A "cost-plus" contract protects companies from changing costs. It gives a fixed profit rate. A "fixed price" contract makes companies responsible for costs. This encourages them to lower costs. But there's a risk: companies might get a big profit if costs are low for other reasons. An inefficient company will prefer "cost-plus." An efficient company will choose "fixed price."
    • However, a "fixed price" contract might make companies cut corners on quality. Strong reasons to lower prices must come with careful checks on quality.
    • A "fixed price" contract might also lead to high profits. Rule-makers might see this. But rule-makers should not try to take these profits. Even if people want them to, taking profits stops companies from wanting to lower costs.
    • So, strong incentives need a promise from rule-makers. An independent agency, safe from public pressure, is important.

Intellectual Property and Monopolies

• In the world of intellectual property (like patents), rule-makers might not have all the information. New ideas can take a long time to become useful.
• New technologies might need many different patents. If each patent costs money, the total cost can become too high. One solution is "patent pools." Here, patent owners put their patents together and offer a discount. This helps both those who use patents and those who own them. But patent pools can also let owners raise prices. If two owners of similar patents work together, there might not be a cheaper option.
• Unfortunately, rule-makers don't always know enough to ban only the patent pools that raise prices. Simple approaches might be best:
  • Make sure patents can be licensed separately outside the pool. This makes patents compete with the pool. Only pools that lower prices will survive.
  • "Unbundling" means users can buy individual licenses from the pool. The pool's price is then the sum of these individual licenses.

• Often, there are many ways to solve a technology problem. A group that sets standards might choose only one way. This can make some intellectual property a "standard essential patent." Users must use this patent to meet the standard. Then, the patent owner can ask for a monopoly price.
• To stop companies from taking unfair advantage, standard-setting groups ask companies to agree beforehand. They must license their patent on fair and reasonable terms. But what does "fair and reasonable" mean? People won't invent new things if they don't know what they might earn.
• Economists have suggested that patent owners agree to licensing terms before a standard is chosen. But this doesn't happen often.

Two-Sided Markets

• A two-sided market has a central platform that helps two different groups. For example, a marketplace helps sellers and buyers. A video game console helps game makers and players. Streaming services help advertisers and viewers. Money cards help buyers and merchants.
• The central platform will likely give a discount to the group that is most helpful to the other. For example, a social media platform might be free for users but charge advertisers. This is because users are valuable to advertisers.
• This leads to uneven pricing. One side might use the platform for free. They might even get rewards, like frequent flyer miles. The other side is charged a lot.
• A rule-maker who doesn't fully understand two-sided markets might complain. They might think the low price side is unfair or the high price side is too expensive. But these pricing methods are common, even for small companies.

General Rules for Regulation

• Regulation stops powerful companies from charging high prices. But rule-makers often set rules not just for price levels, but also for how prices are structured. Here, rule-makers also lack information. The need for rules about price structure is less clear than for price levels. Market power might lead to higher prices, but less so to unfair price structures. Any rule about price structure must be based on careful study. Rule-makers have set price structures when they felt they didn't know enough to set prices. But these structures were often very inefficient. If rule-makers can use information from different sources, a total price limit can help. This gives companies strong reasons to be cost-efficient and choose a good price structure.
• Instead of always checking what companies are doing, rule-makers should create reasons for companies to check themselves.
• Rule-makers might want to limit prices. But price limits require companies to have low costs. Companies that can't lower costs might reduce quality instead. Rule-makers don't know how much a company can reduce costs. So, it's better to offer companies a choice. They can choose a price limit or share costs with the rule-maker. Companies that can reduce costs will prefer a price limit. Companies that can't will prefer cost-sharing.

Jean Tirole's Awards

Jean Tirole received the Nobel Memorial Prize in Economic Sciences in 2014. He won it for his work on market power and how to regulate natural monopolies.

He has also received many other honors:

• He has been given honorary doctorates from several universities. These include the Université libre de Bruxelles (1989), the London Business School (2007), and the University of Montreal (2007). Other universities include the University of Mannheim (2011), the Athens University of Economics and Business (2012), the University of Rome Tor Vergata (2012), and the University of Lausanne (2013).
• The "Prix Claude Levi-Strauss" in 2010.
• The CME-MSRI prize in Innovative Quantitative Innovations in Finance in 2010.
• The Tjalling Koopmans Asset Award (from Tilburg University) in 2010.
• The Outstanding Contributions to the Profession Award (from the International Association for Energy Economics) in 2009.
• The first BBVA Foundation Frontiers of Knowledge Award in Economics, Finance and Management in 2008.
• The Prix du Cercle d'Oc in 2008.
• The Gold Medal of the French CNRS in 2007.
• The Gold Medal of the city of Toulouse in 2007.
• The Public Utility Research Center Distinguished Service Award (from the University of Florida) in 1997.
• The Yrjö Jahnsson Award from the Yrjö Jahnsson Foundation and the European Economic Association in 1993.

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

He is considered one of the most influential economists in the world. This is according to IDEAS/RePEc. Besides his many academic awards, he was made a Chevalier de la Légion d'honneur in 2007. He also became an Officer in the Ordre national du Mérite in 2010.

See also

In Spanish: Jean Tirole para niños