Market failure

Pollution is a typical type of market failure, wherein common people who never benefit from productions that incurred the pollution were worse-off by suffering from it.

Market failure is a term describing the fact that market fails to attain the optimal or efficient allocation of resources. However, this does not necessarily mean economic failure. Sometimes it is suggested that non-market institutions (such as the production of national security) prove to be more successful in bringing welfare to society than market solutions.

It’s rather rare that a market doesn’t fail. Economists and policy makers only pay attention to market failures that have fiercely negative impact on our economy.

Types of market failures include:

  • Imperfect competition or market power: monopoly / monopsony, oligopoly / oligopsony, monopolistic competition, price discrimination, …
  • Externalities: public goods, pollution, …
  • Imperfect information or information asymmetry
  • Transaction cost: cost of search, measure, decision-making, bargaining, communication, regulation, contract enforcements, …

Welcome Back!

Login to your account below

Retrieve your password

Please enter your username or email address to reset your password.

Are you sure want to unlock this post?
Unlock left : 0
Are you sure want to cancel subscription?