France's Tirole wins Nobel in economics:Daily Star

French economist Jean Tirole won the Nobel Economics Prize yesterday, for his analysis of big companies, market power and regulation, the Royal Academy of Sciences said. Tirole, the second Frenchman to be honoured this year, is "one of the most influential economists of our time," the jury said. "Many industries are dominated by a small number of large firms or a single monopoly," the jury said of
the economist, from Toulouse 1 Capitole University. "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." The power of markets and the importance of strong and appropriate regulation has been a central issue in the management of national economies in recent years. This has been the case especially since the 1980s, when policies in advanced countries moved progressively to allowing markets a freer role, and privatised former state monopolies, with the aim of raising competition and reducing inflation. One of the chief contributions of 61-year-old Tirole is the insight that market dominance works differently in different industries, according to the jury. Advertisement It noted that undercutting prices has traditionally been disciplined under competition, or anti-trust, law, because setting prices below production costs is one way of getting rid of competitors -- but this is not necessarily true of all markets. In the newspaper market, for example, giving away papers free can be a way of attracting readers and thus new advertisers to cover the losses arising from production and distribution. "In this case, it is doubtful whether undercutting should be banned," the jury said. "The best regulation or competition policy should therefore be carefully adapted to every industry's specific conditions." Tirole's research has also showed that some companies -- for example producers of widely used but patented software -- are able to dominate not just their own industry, but also neighbouring industries further down the production chain. "If the innovation is sold to only one firm, this firm makes a high profit because it becomes more efficient than its competitors. The producer can then set his price considerably higher," the jury said. The jury argued that Tirole's work has provided a framework for designing policies for a number of industries, ranging from telecommunications to banking. The citation comes amid growing controversy over the market power of such companies as Amazon and Google. "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," it said. The prize will be awarded at a ceremony in Stockholm on December 10, the anniversary of the death in 1896 of the prizes' creator, Swedish scientist and philanthropist Alfred Nobel.