Jean Tirole and Industrial Organizaton

Graduate students in economics will instantly know Jean Tirole from his textbook, The Theory of Industrial Organization. In this textbook, Tirole brought game theory to the study of industrial organization–the study of firm behavior in different market structures (competition, duopoly, oligopoly, monopoly). First published in 1988 this textbook has been the dominant one in the field since that time. (Tirole has also written excellent advanced textbooks in game theory and finance which together have made him one of the most influential teachers of graduate students everywhere). The new game theory provided new answers and new questions. We can see in this prize the continued working out of the game theory revolution in different areas in economics. First the prizes went to the founders (Nash, Selten, Aumann, Schelling) and then to applications of the new theory in different areas (Hurwicz, Maskin and Myerson for mechanism design, Vickrey for auctions). This is probably the last one in this line as behavioral approaches take over and game theory runs out of steam.

Comments

I agree with the main point, but Krugman's prize definitely was not primarily about applying game theory to international trade and economic geography. His most-cited work was a success precisely because he avoided using game theory. Applying tools of monopolistic competition proved suitable for modelling economics of scale while avoiding the complexities of strategic interaction between imperfectly competitive firms.

I was thinking of strategic trade policy and also monopolistic competition as a kind of game theory but your point is well taken and I cut.

A post on where you draw the line between game theory and behavioral approaches to economics would be interesting and informative. Apologies, if you have already covered this theme, but I think not in the last 18 months.

I'd like to see this too.

Game theory requires formal mathematical modelling
Behavioral economics requires only words

Actually, propertly done behavioral economics requires *experiments*.

Game theory is distinct from, well, game practice.

The last line kinda makes me sad. I don't like this supplanting of game theory by behavioral approaches.

Not to worry! I am not aware of any behavioral approaches that do not use game theory; the typical behavioral approach just makes some funny explicit assumptions about payoff functions, beliefs, or how well a player controls his strategy.

You forgot the Nobel prize to Roth and Shapley for market design.

Harsanyi is also one of the founders who has won.

Stupid question, but what rule of thumb distinguishes Platform Market from non? Every market actor can be conceived of as providing a platform whereby two or more sides come together where 1 or both pay. A supermarket, restaurant both bring food producers and eaters together.

First, there has to be a monopoly.

Second, if one restaurant doesn't want to sell my fruit, another will.

If I write an app for the iphone, I'm subject to whatever Apple decides. If there isn't effective competition to their platform, both the developer of apps and the purchaser are open to monopolistic manipulation.

If the regulators knew the natural monopoly's costs curves with certainty, what would be the best regulation, MC price regulation or ATC price regulation?

Evidence of history says that the natural monopoly should be
(a) government-owned
(b) managed by an arms-length board (not directly by elected officials) who have the right to set rates, but not the right to set their own salaries

This is how typical city water systems are run. It works *well*.

...so the prices are generally set to cover full costs (break even), with added subsidy if voters vote for mayors who demand it, or added profit if voters vote for mayors who demand low taxes.

Oh, one subtle point: the appointed board should never be allowed to issue bonds, that should have to go up to the elected officials.

These are hard-earned results; the three main risks faced in designing a structure for managing natural monopolies are:
(1) profiteering by administrators -- eliminated by public ownership and inability of administrator to set his own salary
(2) elected official pandering with low rates which don't cover maintenance ("the next guy's problem") -- eliminated by the arms-length administrators
(3) elected official avoiding responsibility and allowing system to accrue debt which will be "the next guy's problem" -- eliminated by requiring debt issuance to go through the elected officials

elektrikli caraskalKALİTE POLİTİKAMIZ
Kaldırma ve Taşıma Ekipmanları,Çelik Halat, Zincir ve Deniz sektöründe müşterilerimizle uluslararası kabul görmüş standartlarda en iyi hizmeti sunarak lider firma olmak, tüm çalışan- larımızla sürekli kalite kavramını çevreci bir anlayış içinde tatbik etmek şirketimizin politikasıdır.

KALİTE POLİTİKAMIZ
Kaldırma ve Taşıma Ekipmanları,Çelik Halat, Zincir ve Deniz sektöründe müşterilerimizle uluslararası kabul görmüş standartlarda en iyi hizmeti sunarak lider firma olmak, tüm çalışan- larımızla sürekli kalite kavramını çevreci bir anlayış içinde tatbik etmek şirketimizin politikasıdır. yarı manuel istif makinası

KALİTE POLİTİKAMIZ
Kaldırma ve Taşıma Ekipmanları,Çelik Halat, Zincir ve Deniz sektöründe müşterilerimizle uluslararası kabul görmüş standartlarda en iyi hizmeti sunarak lider firma olmak, tüm çalışan- larımızla sürekli kalite kavramını çevreci bir anlayış içinde tatbik etmek şirketimizin politikasıdır. akülü istif makinesi

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