The announcement was made at Sweden's Royal Academy of Sciences in Stockholm.
"Jean Tirole is one of the most influential economists of our time," the committee reasoned in a statement.
"He has made important theoretical research contributions in a number of areas, but most of all he has clarified how to understand and regulate industries with a few powerful firms."
Tirole's work has revolved around market failures that arise from industries that are dominated by a small number of large firms or a single monopoly. Such markets often result in high prices or unproductive firms.
Since the mid eighties, Tirole has "breathed new life" into research on such market failures, the Nobel Committee said.
A member of the jury said that Tirole has been on the cards as a potential laureate for a while.
"It's been clear that Jean Tirole is worthy, the questions have just been precisely for what, with whom, and when," he said.
Tomas Sjöström, Nobel Committee member and Professor of Economics at Rutgers University in the US told The Local that Jean Tirole's work was significant because it could be applied to a range of industries, from large telecoms companies and railways, to the Stockholm and Skåne start-up scenes.
"Start-up firms need access to resources that are controlled by other firms, but as Tirole taught us, you need to look at each market specifically, to work out how this should best be organized. There is no one-size-fits-all rule," he said.
Tirole is a French citizen, who was born in 1953 in Troyes, France.
He studied at the Massachusetts Institute of Technology, in the US and now works as the Scientific Director at Institut d’Économie Industrielle at the Toulouse School of Economics in France.
On the phone from France, Tirole said he was honoured to receive the award.
"Thank you, I am so moved," he said.
Tirole, aged 61, is six years younger than the average Nobel Ecomonics winner. He will take home 8 million kronor ($1.1 million) in December when all the laureates gather for the official ceremony.
The Nobel Committee announcing Tirole as the winner. Photo: TT
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Unlike the other prizes, the Nobel Prize for Economic Sciences wasn't requested in Swedish scientist Alfred Nobel's will. It was launched by Sweden's Riksbank (central bank) in the 1960s, but it follows the same principle as the other prizes, with winners deemed to have produced research or made discoveries that have benefited mankind.
This prize has now been awarded 46 times to 75 Laureates between 1969 and 2014.