市场失败 Market failure
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definition of market failure
- Market failure is a situation in which the free market fails to allocate goods and services efficiently, resulting in a suboptimal outcome.
- In other words, market failure occurs when the market mechanism does not lead to the most efficient use of resources, and may result in a misallocation of resources, overproduction or underproduction.
reasons for market failure
- Externalities
- Externalities occur when the actions of one economic agent affect the welfare of others, either positively or negatively, without the corresponding compensation.
- For example, pollution from a factory may harm the health of nearby residents without compensation, or a vaccine may reduce the spread of a disease and benefit the community as a whole without compensation.
- Externalities can lead to inefficient outcomes, as the market may fail to take into account the full social costs or benefits of an activity.
- Information failure, Provision of Merit and Demerit Goods
- Information failure occurs when market participants have incomplete or inaccurate information about the goods or services being traded.
- Merit goods are goods and services that are deemed to be socially desirable and under-provided by the market, such as education and healthcare, while demerit goods are goods and services that are deemed to be socially undesirable and over-provided by the market, such as cigarettes and alcohol.
- The market may fail to provide an optimal amount of these goods due to externalities, imperfect information, or irrational behavior.
- Provision of Public Goods
- Public goods are goods and services that are non-excludable and non-rivalrous in consumption, such as national defense and street lighting.
- These goods are typically provided by the government as the market may fail to provide them due to free-rider problems and the difficulty of excluding non-payers.
- Adverse Selection and Moral Hazard
- Adverse selection occurs when one party in a transaction has better information than the other party, leading to inefficient outcomes. For example, insurance companies may face adverse selection if only high-risk individuals purchase insurance.
- Moral hazard occurs when one party has an incentive to take excessive risks or shirk their responsibilities due to incomplete contracts or insufficient monitoring. For example, a bank may take on excessive risk knowing that the government will bail it out in the event of a crisis.
- Abuse of Market Power
- Market power refers to the ability of a firm or group of firms to influence the price or quantity of a good or service in the market.
- Abuse of market power occurs when firms use their market power to engage in anti-competitive behavior, such as price-fixing or exclusionary practices, leading to inefficient outcomes.