Market Failure

Distortions in Economics
Examination of how distortions impact the efficiency of price mechanisms in an economy.
Adverse Selection
An economics term defined as the tendency for a contract to attract the types of agent that are least profitable for the issuer, often due to asymmetric information.
Asymmetric Information
A situation where some participants in an economic transaction have access to more, or better, relevant information than other participants.
externality
A comprehensive overview of the economic concept of externality, including its types and implications.
Government Failure
Government failure occurs when government intervention in the economy either does not lead to a Pareto efficient outcome or worsens the situation.
Harberger triangle
A geometric representation of the economic loss of welfare caused by market failure or government failure.
Incomplete Markets
Situations where certain goods or services cannot be traded because there is no organized market on which to trade.
Information Asymmetry
Information asymmetry occurs when one party in a transaction has more or better information than the other party.
Lemon
An unsatisfactory product where quality cannot reliably be checked before purchase.
Market Failure
An examination of market failure in economic contexts, its sources, and implications for government intervention.
Market for Lemons
An economic theory that describes how asymmetric information can cause market failure, often illustrated through the used-car market.
Moral Hazard
The observation that a contract promising payment for certain events changes behavior to increase the likelihood of these events.