Circumstances in Which Market Regulation May Be Desirable

When a market operates inefficiently, economists call the situation a market failure. In this chapter, we will address the generic types of market failure:

  • Market failure caused by seller or buyer concentration
  • Market failure that occurs when parties other than buyers and sellers are affected by market transactions but do not participate in negotiating the transaction
  • Market failure that occurs because an actual market will not emerge or cannot sustain operation due to the presence of free riders who benefit from, but do not bear the full costs of, market exchanges
  • Market failure caused by poor seller or buyer decisions, due to a lack of sufficient information or understanding about the ...

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