Jean Tirole and his revolution of market power – n-tv.de NEWS

Jean Tirole and his revolution of market power – n-tv.de NEWS

Economy
 

 Monday, October 13, 2014

 
 
 

 
 Cartels, mergers, price dictation: Supervisors want to break the power of large corporations – in favor of consumers. Approaches to this has been studied and it now received the Nobel Prize in French. But Jean Tiroles research involve a downer.
 

 

How can the government curb the hunger for power of Internet companies such as Google or Amazon? How can he large corporations such as rail or post, which had monopoly for decades supervise and prevent cartels? These are central questions of economic policy, but also every consumer concern – whether it comes to the Internet or search the web prices. Basic models to find an answer to these problems, the Frenchman Jean Tirole has developed since the 1980s. Now the economist receives for his research the Nobel Prize In Economics

His works are recommendations to policy and competition authorities -. Whether it comes to price dumping, artificially high prices or decisions on mergers. If a company dominated for example, an entire industry and has a monopoly on a particular product or service, it can provide customers dictate the prices and keep competitors.

What can the state do?

Then the state antitrust authorities have to intervene. On the other hand, are those oligopolies – ie markets where only a handful of all-powerful provider faces many buyers – often unavoidable. It would make no sense about when railway companies build parallel railroad tracks or a homeowner is powered by the same multiple water lines. What can the state do?

“Tirole has applied modern methods and drawn policy-relevant conclusions. This was a revolution,” says Prof. Volker cam of the University of Mannheim, the Tirole 2011 has awarded an honorary doctorate. Until then, policies and authorities are usually followed traditional rules. These have counted to set price limits for monopolists and to prohibit mergers between competitors.

The Frenchman changed with new approaches to thinking and showed that simple recipes do not fit. His theory he applied to the telecom and banking industry. In his research showed Tirole that price limits a company can indeed get them to reduce costs – but they can also bring in excessive profits at the same time. This would be an undesirable effect.

Tirole showed that collusion on prices are bad for the customers. In contrast, agreements for patents the company can definitely use. His models showed that a merger between a company and its suppliers hinders competition, but also can inspire invention and innovation. With this unique approach, the economist changed the work of Supervisors.

Two-sided markets

“Tirole has shown that the best supervision and competition policy is to take into account the particularities of an industry”, wrote the Nobel Prize Committee. His conclusion loud: Large companies need to be regulated quite differently in different markets and

Special recognition receives Tirole for his insights into the regulation of so-called two-sided markets, in which two groups use one and the same platform.. The concerns about the media, where readers and advertisers meet, as well as the credit card industry or social networks.

“We have shown that such markets operate very differently,” the newly crowned laureates on the phone says the committee. At Google, a customer several services such as e-mails and the search function get nothing – even though the businesses incur costs. What was unthinkable elsewhere, whether in this case, good for the customer and the provider of advertising. “The guards must therefore look closely,” says Tirole.

to the much-discussed topic of banking regulation referred teaches at the University of Toulouse scientists equal position. Tirole praised that Europe Geldhäuser much stricter on guard since the last financial crisis. But that is not enough, since many banks worked globally: “We need global instances, global authorities.”

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Despite all the practical applications remains a downer some economists view. According to Prof. Max Otte of the Fachhochschule Worms regulators are lagging in practice always behind. “The guards, especially in Europe are too weak to fight against Americans like Google, Amazon or Microsoft. The big companies simply accumulate more and more power.”

  Source: n-tv.de