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In neoclassical economics, market failure is a situation in which the allocation of goods and services by a free market is not Pareto efficient, often leading to a net loss of economic value. [ 1 ] [ 2 ] [ 3 ] The first known use of the term by economists was in 1958, [ 4 ] but the concept has been traced back to the Victorian philosopher Henry ...
In economics, coordination failure is a concept that can explain recessions through the failure of firms and other price setters to coordinate. [1] In an economic system with multiple equilibria, coordination failure occurs when a group of firms could achieve a more desirable equilibrium but fail to because they do not coordinate their decision making. [2]
In economics, a market is a coordinating mechanism that uses prices to convey information among economic entities (such as firms, households and individuals) to regulate production and distribution.
In contract theory, mechanism design, and economics, an information asymmetry is a situation where one party has more or better information than the other. Information asymmetry creates an imbalance of power in transactions, which can sometimes cause the transactions to be inefficient, causing market failure in the worst case.
In the context of public economics, the term government failure refers to an economic inefficiency caused by a government regulatory action, if the inefficiency would not have existed in a free market. [1] The costs of the government intervention are greater than the benefits provided.
In economics, the free-rider problem is a type of market failure that occurs when those who benefit from resources, public goods and common pool resources [a] do not pay for them [1] or under-pay. Free riders may overuse common pool resources by not paying for them, neither directly through fees or tolls, nor indirectly through taxes.
In economics, the hold-up problem is central to the theory of incomplete contracts, and shows the difficulty in writing complete contracts. A hold-up problem arises when two factors are present: A hold-up problem arises when two factors are present:
In economics, the market mechanism is a mechanism by which the use of money exchanged by buyers and sellers with an open and understood system of value and time trade-offs in a market tends to optimize distribution of goods and services in at least some ways.