The BBVA Foundation honours senior advisers Timothy Bresnahan and Ariel Pakes for founding and shaping the field of empirical industrial organisation.
The 2017 BBVA Foundation Frontiers of Knowledge Award went to Cornerstone Research senior advisers and testifying experts Timothy Bresnahan of Stanford University and Ariel Pakes of Harvard University.
Professors Bresnahan and Pakes, along with Robert Porter of Northwestern University, received the award in the Economics, Finance and Management category for ‘developing methodologies that had a significant and long-lasting impact on subsequent work in industrial organisation as well as other applied fields.’
Motivated by important and policy-relevant questions in applied economics, the award recipients developed methodologies that have had a significant and long-lasting impact.
The jury describes Professor Bresnahan’s work as having laid the foundations for the ‘new empirical industrial organisation.’ They noted that the models he developed are used by antitrust authorities in many parts of the world, including the United States and the European Union.
Professor Pakes’s models to estimate demand and substitution patterns in differentiated product markets are used in academia and in regulatory and professional analyses of antitrust questions. Further, his productivity estimation methods have become a standard tool in the empirical study of industrial output.
The main achievement of their work, according to Professor Pakes, is that they developed ‘the empirical tools to figure out the appropriate assumptions, and then do the analysis. An example would be, “what are the likely impacts of a merger or of a tariff change?” The models we developed are able to predict these counterfactuals.’
Professor Bresnahan noted, ‘It is essential that we understand new industries (finance and high tech particularly) well enough to deploy effective competition policies. That is the biggest challenge facing the field.’