On May 23, Fudan welcomed a world-renowned economist to the university. Jean Tirole, the 2014 Nobel laureate in economics and a professor of economics from the Toulouse School of Economics (TSE) in France, was appointed as Academic Co-director of Fudan-TSE Research Institute of Innovation and Digital Economy (FT-RIDE), along with Professor Zhang Jun, a University Professor and dean of Fudan’s School of Economics.
Jean Tirole is the second Nobel Laureate to join Fudan community after Michael Levitt, the 2013 Nobel laureate in chemistry. Tirole made tremendous contributions in all fields of modern economics including macroeconomics, theory of industrial revolution, game theory, incentive theory, innovation and IP, corporate finance, psychological and behavioral economics, and more.
FT-RIDE is a scientific research institution co-established by Fudan University and Toulouse School of Economics, one of the top economics schools in the world. The institution was unveiled in November 2022, during the centennial celebration of Fudan’s School of Economics. Collaborating with Toulouse School of Economics and introducing world-renowned economists including Tirole will create new momentum for the development of the university’s educational and research capacity.
Jin Li, academician of the Chinese Academy of Sciences and president of Fudan University was delighted to welcome Professor Tirole to Fudan. “I hope that TSE and Fudan can work together and make FT-RIDE an exclusive academic platform with international reputation in the field of innovation and digital economy. Together, we will propose new economic theories based on China’s economy. This partnership will also help strengthen the friendship between China and France.” The appointment ceremony also revealed that Professor Zhang Jun from Fudan University and Professor Stéphane Straub from TSE will serve as co-deans of FT-RIDE, and Professor Kou Zonglai, vice dean of Fudan’s School of Economics, will serve as executive vice president of FT-RIDE.
Platforms should be fair “gatekeepers” in digital ecosystems
As the founder of the theory of platform competition in two-sided markets, hailed as the most important theory on digital economy, Professor Tirole gave a lecture during the Fudan Economic Forum on the topic of “Fair Gatekeeping in Digital Ecosystems”.
Digital economy is booming and numerous merchants have chosen to join platforms to provide consumers with goods and services. In order to encourage healthy and orderly development of such digital ecosystems, it is especially important to maintain a fair “platform arena”. “Platforms such as WeChat, Apple, Amazon have become the ‘gatekeepers’ of digital economy as they control the channels which merchants, app developers, and advertisers use to reach consumers. However, many of these platforms charge excessive fees and have self-preferencing tendencies that need to be effectively monitored,” Tirole explained.
“Taking the EU’s Digital Market Act (DMA) as an example, though it emphasizes on ‘fair, reasonable, and non-discriminatory’ access conditions, it leaves an open question of what ‘fair and reasonable’ means conceptually. Can we design good measurements or rules to constrain the fees charged to merchants and apps by digital platforms?” He asked.
A core concept of Tirole’s presentation is the “zero lower bound” which means that the minimum price for digital goods and services is zero because otherwise “negative prices” or subsidies would incentivize consumers to engage in arbitrage. That would create an efficiency problem. So, many platforms and merchants are currently offer services to consumers for free, and platforms that attract more customers can receive ancillary benefits such as advertising revenues and data collection.
By separating the platforms’ apps into in-house apps and 3rd party apps, Tirole used a simple mathematical model to analyze the impact of different access charge conditions on the two types of merchants as well as the entire digital ecosystem of the platform. When the access charge is lower than ancillary benefits, the opportunity cost is negative and in-house apps are likely to be suppressed by 3rd party apps. This may result in the platform intentionally lowering the ranking of 3rd party apps to improve the ranking of in-house apps. However, when access charge is higher than ancillary benefits, 3rd party apps would increase their price resulting in fewer consumers choosing their products. The platform is also forced to reduce consumer prices in order to retain consumers.
“Therefore, in a digital ecosystem, the simple and optimal rule is that the access charge for platforms and merchants should be equal to the ancillary benefits. This is the scenario that will most likely stimulate business creativity and provide consumers with the most choices,” concluded Tirole.
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Presented by Fudan University Media Center
Writer: Liao Entung
Editor: Wang Mengqi, Li Yijie
Designer: Jia Yingyue
