The New Palgrave Dictionary of Economics

Living Edition
| Editors: Palgrave Macmillan

Gérard-Varet, Louis-André (1944–2001)

  • Rodolphe Dos Santos Ferreira
Living reference work entry
DOI: https://doi.org/10.1057/978-1-349-95121-5_2294-1

Abstract

Born on 30 June 1944 at Auxerre, Gérard-Varet studied economics and sociology at the University of Dijon, and prepared his doctorate partly at CORE (Louvain). He taught, as full professor, in Strasbourg, Toulouse and, for most of his academic career, Marseille, where he died on 31 January 2001. He played a quite important role, not only through his teaching and his scientific production, but also as an organizer, in particular as long-term director of his research centre (GREQAM, Marseille) and president of national and international economic associations.

Keywords

Adverse selection Art, economics of Competitive toughness index Endogenous fluctuations Enforcement mechanisms Expected externality mechanism Farkas lemma General equilibrium Gérard-Varet, L.-A. Imperfect competition Industrial organization Involuntary unemployment Lagrange multipliers Market share Market size Mechanism design Moral hazard Oligopolistic competition Overlapping generations P-equilibrium Pricing schemes Truth revelation 

JEL Classifications

B31 

Born on 30 June 1944 at Auxerre, Gérard-Varet studied economics and sociology at the University of Dijon, and prepared his doctorate partly at CORE (Louvain). He taught, as full professor, in Strasbourg, Toulouse and, for most of his academic career, Marseille, where he died on 31 January 2001. He played a quite important role, not only through his teaching and his scientific production, but also as an organizer, in particular as long-term director of his research centre (GREQAM, Marseille) and president of national and international economic associations.

The first set of the theoretical contributions of Gérard-Varet concerns mechanism design, a field in which he began to collaborate in 1973 with Claude d’Aspremont, in the context of a project on cross-border pollution. Starting from the Vickrey–Clarke–Groves mechanism, which ensures that truth revelation by each agent is a dominant-strategy equilibrium, but not that the budget is balanced, they introduced the expected externality (or AGV) mechanism, which is both truthfully implementable as a Bayesian equilibrium and budget-balanced. The mechanism was explicit, while requiring independence of agents’ beliefs. This condition was considerably generalized by switching from a constructive to an existence proof, based on the Farkas lemma (1979, 1990a). Restrictions on beliefs under adverse selection were also shown to be transposable to stochastic outcome functions in team moral hazard, and to be applicable to two kinds of enforcement mechanisms: enforcement through transfer schemes and enforcement through repetition (1998). More generally, the work of the mid-1970s opened the way to a lifelong research programme.

The second set of the theoretical contributions of Gérard-Varet concerns oligopolistic competition (in partial, general and macroeconomic equilibrium). In 1980, he engaged in the analysis of the macroeconomic effects of significant output market power. He first showed the possibility of so-called involuntary unemployment (in Keynes’s sense of persistent unemployment at an arbitrarily low money wage). This results either from the non-existence of a full employment equilibrium (because marginal revenue eventually becomes negative as wages decrease) or, when equilibria are multiple, from a failure to coordinate on that equilibrium (1990b). The early static results were extended to overlapping generation economies and linked to the emerging literature on markup variability as a source of endogenous fluctuations (1995a). The need for a unified treatment of different standard varieties of imperfect competition motivated the formulation of the P-equilibrium concept, first applied to an industry or a group of industries (1991), then to the whole economy, in a general equilibrium approach (1997). Strategic agents simultaneously choose price signals in order to manipulate market prices through some pricing scheme P, and quantities, required to satisfy market realization constraints. A distinct but related concept of oligopolistic equilibrium was designed later (2007), where producers of elements of a composite good choose price–quantity pairs under two constraints, on market share and on market size. The associated Lagrange multipliers are used to build an index of competitive toughness, parameterizing the set of equilibria and appearing as a foundation to the ‘conjectural variations’ parameter of the empirical industrial organization studies.

The preceding themes by no means exhaust the list of subjects on which Gérard-Varet has made theoretical and applied contributions, often combining features of public economics and industrial organization, of which the economics of visual arts is a good example (1995b).

See Also

Selected Works

  • 1979. (With C. d’Aspremont.) Incentives and incomplete information. Journal of Public Economics 11: 25–45.

  • 1990a. (With C. d’Aspremont and J. Crémer.) Incentives and the existence of Pareto- optimal revelation mechanisms. Journal of Economic Theory 51: 233–254.

  • 1990b. (With C. d’Aspremont and R. Dos Santos Ferreira.) On monopolistic competition and involuntary unemployment. Quarterly Journal of Economics 105: 895–919.

  • 1991. (With C. d’Aspremont and R. Dos Santos Ferreira.) Pricing schemes and Cournotian equilibria. American Economic Review 81: 666–673.

  • 1995a. (With C. d’Aspremont and R. Dos Santos Ferreira.) Market power, coordination failures and endogenous fluctuations. In The new macroeconomics: Imperfect markets and policy effectiveness, ed. H. Dixon and N. Rankin. Cambridge: Cambridge University Press.

  • 1995b. On pricing the priceless: Comments on the economics of the visual art market. European Economic Review 39: 509–518.

  • 1997 (With C. d’Aspremont and R. Dos Santos Ferreira.) General equilibrium concepts under imperfect competition: A Cournotian approach. Journal of Economic Theory 73: 199–230.

  • 1998 (With C. d’Aspremont.) Linear methods to enforce partnerships under uncertainty: An overview. Games and Economic Behavior 25: 311–336.

  • 2007. (With C. d’Aspremont and R. Dos Santos Ferreira.) Competition for market share or for market size: Oligopolistic equilibria with varying competitive toughness. International Economic Review 48(3) (forthcoming).

Copyright information

© The Author(s) 2008

Authors and Affiliations

  • Rodolphe Dos Santos Ferreira
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