Glossary of economics research
Results of search for market failure follow:
market failure:
A situation, usually discussed in a model not in the real world, in which the
behavior of optimizing agents in a market would not produce a Pareto
optimal allocation. Sources of market failures:
-- monopoly. Monopoly or oligopoly producers have incentives to underproduce
and to price above marginal cost, which then gives consumers incentives to buy
less than the Pareto optimal allocation.
-- externalities
Source: Layard and Glaister, 1972, p 15
Contexts: general equilibrium; public
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