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The Future of Finance THE TOULOUSE SCHOOL OF ECONOMICS MAGAZINE Living economics #16 SPRING THE FUTURE 2018 OF FINANCE Daniel Ershov on Johannes Hörner Ariel Pakes on Patrick Pouyanné the Google Play on how Waze uses why industrial on the energy Store its users organization matters challenge Editor�' message #16 Content� Looking New� & event� to the future 4 Appointments & prizes 5 Save the date Last year marked TSE’s 10th anniversary, a milestone in the long history of economics in Toulouse. 2017 also saw our endowment strengthened through the renewal of our Laboratoire d’Excellence status and an exciting new certification for our “CHESS” graduate school project - Challenges in Economics and Christian Gollier Quantitative Social Sciences. We are grateful for and proud of these strong signals of support which will help our institution tremendously. Researc� TSE wasn’t built in a day. It took more than 30 years for Jean- 6 Reducing search costs Jacques Laffont and the leading academic peers he convinced THE FUTURE Daniel Ershov to join him to accomplish his dream of building a world-class economics department in Toulouse with bright, intense academic OF FINANCE 8 Why would Waze life. We are lucky to be now living that dream, but our ambition send you off-track? for this new year does not waver. We want to aim higher Johannes Hörner and attract the very best talents to the south of France. Our Jean Tirole minds are focused on the future; our new building, now almost 16 Jean Tirole complete, will be another great asset in making our community one of the best Th inker� places in Europe to do research. As will the “10-vision project” committee which Is the financial system safe? 10 Industrial organization is currently coordinating a community-wide effort here to map out our new 10- The ongoing changes led 18 Catherine Casamatta finally matters year strategic path for both research and education. by automation, blockchain technology, cryptocurrencies, Blockchain: a miner miracle Ariel Pakes The TSE community is working hard on the economic impact of cutting-edge tax reforms, shadow banking 20 Christian Gollier and such forth are reshaping the technologies and this edition features a special dossier on the future of finance. We need to better invest Financial institutions and regulations have always rapidly evolved, yet the ongoing finance world like never before. Actor� for the future changes led by automation, blockchain technology, cryptocurrencies, tax reforms, 24 Tackling the energy shadow banking and such forth are reshaping the finance world like never before. 22 Marianne Andries challenge To help readers better understand and assess these changes, we present here Who’s afraid of news? Patrick Pouyanné some of the latest work and perspectives from the TSE faculty. We are also delighted to include in this edition an extensive interview with the CEO of Total Patrick Pouyanné on the future of the energy industry, as well as an in- Campu� depth interview with Ariel Pakes, the 2017 Jean-Jacques Laffont Prize laureate, on industrial organization and its policy implications, as well of course as the atest 28 Graduates placement figures news and results from our faculty. 30 Career-smart students Trimestrial magazine of Toulouse School of Economics 31 TSE polls Wishing you a pleasant read, and a very happy new year 2018, 21, allée de Brienne - 31 015 Toulouse Cedex 6 - FRANCE - Tél. : +33 (0)5 67 73 27 68 Publication Director: Christian Gollier - Managing Editor: Joël Echevarria Editor in chief: Jennifer Stephenson - Production Manager: Jean-Baptiste Grossetti Christian Gollier, TSE Director With the help of: Claire Navarro - James Nash Graphic design and layout: Yapak Jean Tirole, TSE Chairman Pictures: ©Studio Tchiz, ©Fotolia, ©Istock, ©Total. 1000 magazines printed on offset paper from renewable forests. ISSN: 2554-3253 tse-fr.eu 3 New� & event� Appointments & prizes TSE helps to project a new Save the date voice for research in Europe EconPol Europe (the European Network for Economic and Fiscal Policy Research) is a unique collaboration TSE celebrates award of €10.8 million for 29-30 17-18 of policy-oriented university and non-university MARCH CHESS project research institutes that will contribute their scienti- M AY 2018 2018 The international jury of the “Ecoles universitaires de recherche” chose to support TSE’s fic expertise to the discussion of the future design of project Toulouse Graduate School Challenges in Economics and Quantitative Social the European Union. The network was commissioned Sciences (CHESS) with €10.8 million over 10 years. by the Federal Ministry of Finance and founded in 2017 by the Ifo Institute together with eight other th renowned European research institutes. 10 Biennial Environmental Postal regulation With its cross-border cooperation on fiscal and eco- Economics and industrial nomic issues, EconPol Europe aims at promoting Conference performance Ethical Asset growth, prosperity and social cohesion in Europe Valuation and, in particular, at providing and the Good Society research-based contributions to the successful development Two new In his latest book, TSE vice-president of the European Economic and 24-25 18-19 books Christian Gollier builds a bridge between Monetary Union (EMU). APRIL M AY welfare economics and finance theory to 2018 2018 by Jean-François Bonnefon provide a framework for ethical valua- Reasoning Unbound, Thinking about Morality, tion capable of establishing what asset Delusion and Democracy, was published by prices should be on the basis of our Palgrave Macmillan at the end of 2017 shared moral values. See pages 20-21. CGD 16th Joint and details the way human reasoning Vincent Working Group Workshop is aimed at cooperative social life. Jean- Réquillart on Global Health on Industrial François Bonnefon (TSE-CNRS-CRM) has Procurement Organization also co-edited Moral Inferences, featuring discusses food the latest research on the relationship economics between morality and reason. The TSE-INRA researcher engaged with Nutrition & Santé CEO Didier Suberbielle to debate Vincent’s recent work on 4-5 24-25 the importance of public policies on the nutritional and envi- MAY M AY New international partnership with ronmental impact of food. 2018 2018 National University of Singapore Milo Bianchi TSE and the University of Toulouse th Capitole are delighted to announce wins funding for fi nancial Financial 6 Toulouse they have signed a new collabora- literacy project Ingela Alger Econometrics Economics and tion with the National University of Conference Biology Workshop The TSE-UTC researcher will have the presents her research Singapore (NUS). Starting in 2018, this support of the Think Forward Initiative new agreement will allow students for a research project on the impact of at ‘Women in Science’ event to complete semester or year-long financial literacy on financial vulnerabi- This CNRS-sponsored series of events aims to shed light exchanges. NUS is consistently ranked lity. The Initiative brings together a range on female scientists in different disciplines. Ingela Alger as one of the world's top universities. of experts and research to find out how (TSE-IAST-CNRS) talked about her research on motivation tse-fr.e�/event� and why we make financial choices. and morality. 4 tse-fr.eu tse-fr.eu 5 Researc� DANIEL ERSHOV ON THE GOOGLE PLAY STORE NATURAL EXPERIMENT Reducing search costs aniel Ershov joined TSE in September 2017 as an assistant pro- fessor. His main research interests are fi rm competition, market D regulation, and online markets. He recently worked on the Google Play Store recategorization of applications and tells TSE Mag about his main fi ndings. Contrary to expectations, the Internet I empirically study these effects using did not eliminate consumer search new data from the Google Play mobile costs. Indeed, with the proliferation of app store, a large online market where product varieties, “discoverability” on- most products are free to download. line is a major concern for consumers, App stores have a large number of pro- firms and regulators. Firms may not ducts: thousands of new apps appear want to enter or invest in high quality every week, and it is costly for consu- products if they cannot be found by mers to search for new products. consumers. Regulators are concerned that platforms, by changing search al- App stores are broadly separated into Daniel Ershov gorithms and consumer search costs, “game” and “non-game” areas, and TSE assistant professor can influence firm entry, investment in- surveys suggest that consumers pri- centives and the degree of online com- marily search for apps by browsing petition. These considerations played a through categories in the app store (e.g., The re-categorization of the store was a role in the European Commission’s 2.4 “Productivity Apps”). I take advantage surprise to game developers. Additionally, billion euro fine to Google. of a natural experiment: a re-categori- it did not affect the “non-game” area of zation of part of the Google Play store. the store and non-game developers. I In March 2014, Google split its game use difference-in-differences to capture App stores have a large number categories from 6 to 18. Industry obser- three key effects: First, 33% more games enter relative to non-games after the of products: thousands of new vers believe that this reduced consumer search costs. Before the change, consu- re-categorization. Second, most entry apps appear every week, mers browsing through the categories effects are driven by “niche” app types and it is costly for consumers would see different app types together that were more difficult to find before to search for new products (e.g., Family Games and Action Games). the re-categorization. Lastly, the qua- Consequently, consumers looking for lity of the new games – as measured by an app type would not necessarily find consumer ratings – fell after the split re- confirm existing theoretical predictions, Consumer welfare should improve due most of the welfare gains come from While there is a large existing litera- it easily.
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