Econ - Market Failures

Lack of Economic Power

No buyer of seller in the market is able individually to influence the price established by the market

Free Mobility

All resources can be transferred costlessly into or out of the market

Perfect Information

Each participant in the market has complete information about the product, including its quality, price, ability to satisfy desires, and availability of substitutes

Universality

All goods and resources are privately owned and all privileges and limitations with respect to their use are completely specified

Exclusivity

All benefits and costs related to the ownership or use of all goods and resources accrue only to the owner or by sale to others

Transferability

All property rights can be exchanged from one to another

Enforceability

All property rights are protected from unauthorized capture or control by others

Competitive market

Lack of economic power, free mobility, perfect information

Well defined property rights

Universality, exclusivity, transferability, enforceability

Monopolistic competition 

Many companies offer products that are similar but not perfect substitutes, many sellers, easy entry and exit, and some degree of market power, allowing firms to influence prices to a limited extent due to product differentiation. Ex: fast food

Oligopoly

Small number of firms, where each firm must consider the potential reactions of its rivals when making pricing and output decisions. Ex: aviation

Monopoly

Single firm dominates the entire market, having significant control over prices and supply due to a lack of competition. This often leads to higher prices for consumers and restricted output.

Characteristics of tragedy of the commons

Rival: use by one person can diminish another

Non-excludable: open to all

Externality problem: 3rd party spillover

Negative externality

A cost incurred by a third party due to a transaction or activity they are not directly involved in, such as pollution from a factory affecting nearby residents.

Positive externality

A benefit that affects a third party who did not choose to incur that benefit, often leading to overall social improvements.