President of the Jean-Jacques Laffont Foundation and scientific director of the Institute for Industrial Economics (IDEI), Jean Tirole played a major role in establishing one of the world’s largest economic research centers: the Toulouse School of Economics (TSE). He also plays a significant role in economic debate as a member of the Economic Analysis Council (CAE).
The Nobel Prize in Economics recognizes his analyses of market power and its regulation.
Specializing in industrial economics, incentive theory, game theory, and corporate finance, Jean Tirole has published more than 160 academic articles in journals. His efforts were recognized in particular by the CNRS Gold Medal in 2007.
Several members of BSI Economics, who trained at the Toulouse School of Economics, are delighted with this award, which should contribute to the promotion of French economic and academic research.
What is Industrial Economics?
In 1959, Joe Bain published « Industrial Organization, » a major work that gave rise to numerous new research programs. This theoretical field is defined as the study of market structure, which determines the behavior of companies, which in turn influences their performance: this is more commonly referred to as the structure-behavior-performance paradigm.
Challenging correlations without causality, the Chicago tradition (Director, Stigler) attempted to renew the methodological principles of these analyses. One of the main tools that will play a major role is econometrics, which will make it possible to « convey important messages through non-formalized theories, reports, and observations on behavior » and then « present formal models to prove that a certain type of formalized construction can explain or incorporate part of what is actually observed » (Joskow 1975).
We can then observe a renewal of this field in the 1980s (see Richard Arena’s summary on this subject) with theoretical industrial microeconomics taking into account the economics of information. It is more commonly referred to as « industrial organization theory » in reference to the book written by Jean Tirole in 1988. This theoretical field is reinforced by game theory, evolutionary games, and dynamic rather than static studies. Two other branches can be highlighted that complement these analyses. On the one hand, there are the evolutionary currents through the work of Dosi, Freeman, Silverberg, and Soete (1988) and the neo-institutionalists (Coase, North, and Williamson in the 1980s and 1990s), which have notably enabled a better definition of the respective boundaries of the firm and the market. More recently, certain works have placed greater emphasis on the role of conventions, going beyond the sole concern of informational asymmetry, incompleteness, or market imperfections. Finally, self-organization is now becoming a field in its own right, influenced by Krugman’s 1996 book (The Self-Organizing Economy).
Jean Tirole proposes a definition of industrial organization in several dimensions. In the first dimension, he considers this concept as the study of the structure and behavior of companies. In a second dimension, he considers that industrial organization must be a tool for verifying the efficiency of markets. Finally, the third dimension must emphasize the problem of information as a constraint on these inefficiencies.
Beyond the theoretical field, it is also a pragmatic science using two tools. The first is econometric analysis, notably the work of Bresnahan 1987, Joskow 1985, and Porter 1983, and the second tool refers to controlled laboratory experiments (particularly Plott 1982). It is therefore an extremely broad field, complemented by other areas of economics. It is a research program in its own right. But can institutionalist trends be so easily compared to those of industrial organization? It would seem preferable to consider that industrial organization, like other theoretical fields (experimental economics, economics of education, international economics, etc.), has mainly benefited from new tools to carry out both normative and positive work.
