Stockholm: 2014 Nobel Laureate in Economic Sciences, Jean Tirole said that he hasn't recouped yet, after winning the acclaimed prize.
Tirole is the director of Toulouse School of Economics and the third French laureate in Economic Sciences.
Tirole was incredibly surprised when he got the news that he has been awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for 2014. He then told his wife - and his mother. "She's 90 years old. I first asked her to sit before I told her the news."
Tirole's work on how governments can "tame" the big businesses that dominate once-public monopolies like railways, highways and telecommunications won him this year's Nobel prize.
"This year's prize in economic sciences is about taming powerful firms," Staffan Normark, Permanent Secretary of the Royal Swedish Academy of Sciences, told a news conference after awarding the 8 million Swedish crown ($1.1 million) prize.
The academy said Tirole has clarified policies about regulating industries with a few powerful firms, especially after a wave of privatisations had set governments a conundrum over how to encourage private investments in sectors like healthcare and railways while reining in profits.
Many industries are dominated by a small number of large firms or a single monopoly. 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.
From the mid-1980s and onwards, Jean Tirole has breathed new life into research on such market failures. His analysis of firms with market power provides a unified theory with a strong bearing on central policy questions: how should the government deal with mergers or cartels, and how should it regulate monopolies?
Before Tirole, researchers and policymakers sought general principles for all industries. They advocated simple policy rules, such as capping prices for monopolists and prohibiting cooperation between competitors, while permitting cooperation between firms with different positions in the value chain. Tirole showed theoretically that such rules may work well in certain conditions, but do more harm than good in others. Price caps can provide dominant firms with strong motives to reduce costs - a good thing for society - but may also permit excessive profits - a bad thing for society. Cooperation on price setting within a market is usually harmful, but cooperation regarding patent pools can benefit everyone. The merger of a firm and its supplier may encourage innovation, but may also distort competition.
The best regulation or competition policy should therefore be carefully adapted to every industry's specific conditions. In a series of articles and books, Jean Tirole has presented a general framework for designing such policies and applied it to a number of industries, ranging from telecommunications to banking. 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.
"My one merit is to have been with the right people at the right time," the 61-year-old, who is unknown to most French, told Reuters in his office at the Toulouse School of Economics in southwest France, where he is a professor.
It was the second Nobel Prize for a French national this year after author Patrick Modiano won the literature award - a fact not lost on Prime Minister Manuel Valls, trying to deflect attacks from France's EU partners over its battered public finances.
"After Patrick Modiano, another Frenchman in the firmanent: congratulations to Jean Tirole! One in the eye for the French-bashers!" Valls tweeted on his official account.
Tirole himself was cautious on the economic prospects of his country, where unemployment is stuck at around 10 percent and whose leaders last month broke the latest in a series of promises to bring public lending to within EU limits.
"We need to modernise our country, leaving our children a legacy other than unemployment and public debt that they will have to pay off," he said.
The European Commission's antitrust chief Joaquin Almunia hailed Tirole's work on mergers and other deals with potential repercussions for market competition, adding in a statement: "We owe Jean Tirole so much."
(With inputs from Reuters)
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