1.3.1 Types of Market Failure

Cards (3)

  • Externalities
    Third-party effects caused by the production and consumption of goods and services where people are not compensated
  • Information Gap
    When the buyer or seller does not have access to the information needed to make a fully informed decision
  • Free Rider Problem

    Underprovision of a good and consequently market failure due to free riders who have no incentive to reveal how much they would pay for a service since they can benefit without paying