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Foxxx

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may be because there is a lack of information or inaccurate information. Also,there may be asymmetric information which occurs when consumers and suppliers do not have equal information.

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There are several types of market failure:

1. Lack of public goods;

2. External effects;

3. Imperfect competition;

4. Unfair income distribution;

5. Economic fluctuations and imbalances.

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G10-9 Nico
Monopoly: a single seller in a market.
Price fixing: when two ore more firms agree to sell a product at the same price.
Firms act against the interests of consumers by charging high prices and producing poor quality products.
Monopoly power occurs when a firm has market dominance in an industry. (for example, more than 40% market share). Abuse of monopoly power could involve setting higher prices or limiting output. Abuse of monopoly power can lead to deadweight welfare loss, less choice, and problems for suppliers.
Competition Act

In the UK, the Competition and Markets Authority can investigate abuse of monopoly power and act against firms who are found guilty of abusing monopoly power

The prohibition under both Article 82 and the Chapter II prohibition is on the abuse of the dominant position, not the holding of the position. (article)

Firstly the Competition and Markets Authority must investigate whether firms have a dominant position.

They will look at: National or regional market share. Usually, a firm would have to have at least 40% of the market to be considered to be a dominant firm.

The contestability of the market. If barriers to entry are low, then the incumbent firm is unlikely to be dominant even with a high market share because new firms can enter if profits are high.

If the firm is considered to be dominant then the OFT will look at abuses of Monopoly power these include:

Evidence of Abusing Monopoly Power

Charging excessively high prices. This might be difficult to judge, but if they are making high profits then this is an indication that prices are higher than in a competitive situation

Predatory Pricing. This involves cutting prices and selling below average cost to force rivals out of business.

Limiting production and access to technical developments. Artificial barriers to fair access.

Unfair treatment of competitors – e.g. giving preferential treatment to certain parties, placing others at a disadvantage.

Contracts which add supplementary obligations unrelated to the subject of a contract.

Vertical restraints. This involves the monopoly firm imposing prices or restrictions on its suppliers or retailers. For example, this could involve

Selective distribution e.g. Levis’ doesn’t want to supply Tesco supermarkets. Also, this is a significant problem in the UK car industry with car firms entering into selective and exclusive distribution networks to keep prices high. The competition commission report of 2000 found UK cars were at least 10% higher than European cars

Exclusive distribution. Some retailers will only buy from some particular  manufacturers

Tie in sales. E.g. if you buy a printer the company will try and make you buy their own brand ink

Examples

Excessive prices for liothyronine tablets The CMA is investigating alleged excessive and unfair pricing with respect to liothyronine tablets under Chapter II CA98/Article 102 TFEU. (link)

Consequences of abusing monopoly power

OFT can fine firms 10% of annual turnover if they are abusing market power.

In 2003 OFT stated toy manufacturers were guilty of fixing prices and were fined a significant amount.

The OFT can make recommendations such as:

No brewery should be allowed to have more than 2000 public houses

In 1995 It investigated Sega and Nintendo and stated that they should reduce its licensing charges on firms supplying software

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market failure：public and private good.        (Betty )
Public good is a product which is non-rival and non- excludable and hence needs to be financed by taxation .For example, street lights, one more person walking down a lit street does not reduce the benefit that other people receive from the street lights, this called non-rivalry.As for non- excludable there has an example, a flood defense system is built to protect a coastal town, all homes in the area would be protected whether their owners are prepared to pay for it or not .

private good is a product which is both rival and excludable.
For example, an individual cannot take a computer out of a shop without paying for it and if they do buy it, no one else can have that particular computer. Even though primary and secondary education, and healthcare, are not directly charged for in some countries, they are nevertheless private goods. This is because they can be charged for, and also because they are rival goods (in some cases). If one child is occupying a place in a class or one patien is occupying a hospital bed, no one else can occupy these places.

Private sector firms will not have any incentive to make products they cannot charge for.
So too few merit goods and too many demerit goods will be produced if left to market forces, no public goods would be made.So this causes market failure.

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Jego MilK

Market failure: refers to the information difference between two trading parties, and one party can use this information difference to profit, which is like a bug, causing the market to be unbalanced.
For example, in the secondary market, luxury goods sellers can provide genuine products for platform inspection and choose imitation products for profit when shipping; Alternatively, it could be a second-hand car, where the seller can tell the buyer that the car is extremely new and looks like it is, but in reality, the original owner may have already repaired it several times but can sell it to the buyer at a very high price.

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Monopoly refers to a market structure in which there is only one seller that controls the supply of a particular product or service. This concentration of market power can lead to market failures in several ways:
1. Higher prices: Monopolies have the ability to set prices at levels higher than what would prevail in a competitive market. Without competition, consumers have limited alternatives and may be forced to pay inflated prices.
2. Reduced output and variety: Monopolies may restrict production and limit the range of products or services offered to maximize their profits. This can result in a lack of innovation, limited choices for consumers, and a reduction in overall market efficiency.
3. Inefficient allocation of resources: Monopolies may not allocate resources efficiently since they face limited competition and lack the incentive to minimize costs or improve product quality. This can lead to inefficiencies in production and distribution.

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EricJin
Information failure is a classical example of market failure.When consumers are choosing their goods,they are likely to get the most comprehensive information about the product so that they can make the best judgment to seek the greatest satisfaction. Similarly, producers also need to know more about the product to determine the demands of consumers and further produce efficiently to maximize profits.However,in the actual situation,there is a information failure,which cause both consumers and producers get restricted information.So the profit can’t be maximization.

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Demerit goods
Demerit goods are more harmful to consumers than they generate external costs

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The existence of public goods                                                                                due to the characteristics of non-exclusive and non-competitive public goods, consumers want to use these products free of charge, so there is a phenomenon of "free riding", that is, the behavior of not paying costs but obtaining benefits. The supplier of the product, unable to recover its costs, will lose the incentive to provide the product, which leads to the contraction of production.

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The existence of public goods                                                                                due to the characteristics of non-exclusive and non-competitive public goods, consumers want to use these products free of charge, so there is a phenomenon of "free riding", that is, the behavior of not paying costs but obtaining benefits. The supplier of the product, unable to recover its costs, will lose the incentive to provide the product, which leads to the contraction of production.

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Ethan

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1.Failure to take into account all costs and benefits

private costs is costs borne by those directly consuming or producing a product，private benefits is benefits received by those directly consuming or producing a product.

external costs is costs imposed on those who are not involved in the consumption and production activities of other directly.

total social cost=private costs+external costs

total social benefit=private benefits+external benefits

2.Demerit goods

demerit goods are those goods and services that the government feels that people will over- produce，and which ought to be limited in use.

demerit goods and services create negative externalities when consumed and these third party costs can have a significant effect on social welfare.

3.Merit goods

merit goods are those goods and services that the government feels that people will underconsume，and which ought to be subsidized or provided free at the point of use so that consume does not depend primarily on the ability pay for the good or service.

4. Public goods

are not normally provided by the private sector because they would be unable to supply them for a profit.

5.Information failure

may be because there is a lack of information or inaccurate information also there may be asymmetric information which occurs when consumers and suppliers do not have equal information.

6.Immobility of resources

Geographically mobile and ocoupationally mobile

7.Abuse of monopoly power

monopoly is a single seller in a market

price fixing is whentwo more one firms agree to sell a produce at the same price.

firms act against the interests of consumers by charging high prices and producing poor quality products.

8.Short-termism

short termsim means not sufficient resources are being allocated into capital goods.

9.Unfairness

wide gap between the poor and rich

candy

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The market failure are when the markets fail to achieve an efficient outcome. Public goods are things that are for our collective well being,like fire protection,school and national defense are often funded by the government.Public goods is anything having the characteristics of non-exclusion and non-rivalry.Non-exclusion is the idea that you can not exclude people that do not pay.For example,people who pay no federal taxes still get the benefits of protection from ware and people who pay a lot of federal taxes do not get extra protection.Non-rivalry is the idea that one person’s consumption of the goods do not ruin it for other people,like public parks.You can use it today,I can use it tomorrow too.It can be shared.

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Market failure occurs when forces fail to produce the products that consumers demand, in the right quantities and at the lowest possible cost. Market failure arises when markets are inefficient.
One cause for market failure: public goods
Public good is a product which is non-rival and non-excludable and hence needs to be financed by taxation.
The government can produce public goods by itself or pay a private sector company to produce them.
Because the non-excludability leads to the free rider problem, which results in under-provision of a good or service thus causes market failure.

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G10-8 Marcus
Public and private goods.
Public goods have two feature one is non-excludable and the other is non-rival.Public goods is free everybody can gets benefits and advantages from the public goods.But because of the two features of public goods,public goods that are provided for some people and others can consume the goods without paying and these people are called free-riders. Public good’s financed can get through taxation or some subsidies .Private goods are the goods that produced to earn profits and this kind of goods is opposite to public goods which have rival and excludable.The market failure can happened when a private product is monopolized by a firm,then the price of this good will controlled by this company ,like necessities people have to buy it whatever the price is high or low.Another case is the price fixing,this means if more than one company that produce the same goods agree with a price,the price will totally be fixed.

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Tom
The information failure means the differences information between the producers and the consumers,In the most of the times,the information that the producers have is more than the information that consumers have.Thats because the goods is produced by producers ,so they can know more correct information than consumers.For example,if you will buy a second hand car,the producers may pay it for you by high price but you don’t know.

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Wendy
What is market failure:Resources are allocated inefficiently.
The first one is the failure to take into account all costs and benefits.Private costs are the costs borne by those directly consuming or producing a product.Private benefits are the benefits received by those directly consuming or producing a product.And external costs are the costs imposed on those who are not involved in the consumption and production activities of others directly.External benefits are the benefits enjoyed by those who are not involved in the consumption and production activities of others directly.
Total social cost=private costs+external costs
Total social benefit=private benefits+external benefits
Total social benefit should be larger than total social cost
The opportunity cost always include any external costs that occur.
The second one is the Demerit goods.Demerit goods are those goods and services that government feels that people will over-consume or over-produce ,and which ought to be limited in use.Demerit goods and services create negative externalities when consumed and these third party costs can have a significant effect on social welfare.
The third is the merit goods.Merit goods are those goods and services that the government feels that people will under-consume,and which ought to subsidized or provided free at the point of use so that consumption does not depend primarily on the ability to pay for the good or services.Merit goods and services create positive externalities when consumed and these third party benefits can have a significant effect on social welfare.
The fourth is public goods. Public goods are not normally provided by private sector because they would be unable to supply for a profit.
Non-excludability: not possible to exclude non-payers from enjoying the benefits of products. Leads to the free rider problem.
Non-rivalry: consumption of the product by one more person doesn’t reduce someone else’s ability to consume.
The fifth is the information failure.Sellers have more information than the other party or the buyers have more information than the other party, which leads to misallocation of resources.
The sixth is immobility of resources ,the mobility of land,capital,labor,each of them both have occupational immobility and geographical immobility.
The seventh is abuse of monopoly power.Monopoly is a single seller in a market.firms act against the interests of consumers by charging high prices and producing poor quality products.
The eighth is short-termism.Short-termism  means not sufficient resources are being allocated into capital goods.
The ninth is unfairness which means the wide gap between the poor and rich

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is information failure，These are situations where information about buyers and sellers is asymmetrical and often one party has more resources and information than the other for example in the case of buying and selling a used car the seller has more information than the buyer.

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1.failure o take into account all cost and benefit

For products and consumers they not only have private costs and private benefits,but also need to think about external costs and external benefits.An example for external costs is that when factories are producing goods,they will pollute the environment.The benefits for external benefits is that you vaccinate,you can protect the people around you too.  Total social costs =private costs +external costs.Total social benefits =private benefits +external benefits.The more social benefits is,the better will be. The opportunity cost revisited always include any external costs that occur.

2.demerit good

Demerit goods are those goods and services that the government feels that people will over consumers or over produces ,and which ought to be limited in use.Because of the information failure,the equal of market will be broken.When third party costs,demerit goods and services creates negative externalities.When over consumers or over produces ,it will cost market failure.

3.merit good

Merit goods are those goods and services that the government feels that people will under consume,and which ought to be subsidized or provided free at the point of use so that consumption does not depend primarily on the ability to pay for the goods and services. When third party costs,demerit goods and services creates positive externalities.When under consumers  ,it will cost market failure.

4.public goods

Public goods are not normally provided by the private sector because they would be unable to supply them for a profit.Because public goods are non-excludability and non-rivalry.The non-excludability leads to the free rider problem,which results in under provision of a good or service and thus causes market failure.

5.information failure

Information failure happens,may be because there is a lack of information or inaccurate information.Also,there may be asymmetry information which occurs when consumers and suppliers do not have equal information.Sometimes producer know more than consumer,for example second hand car and education.But sometimes consumer know more than producer,such as health insurance.

6.immobility of resources

The geography mobile and occupationally mobile of land ,capital ,labor and enterprise.Geography mobile ,for example is from north to west.Occupationally mobile,for example is from engineer to dancer.

7.abuse of monopoly power

Firms act against the interests of consumer by charging high price and producing poor quality products.Because only this firm produce this production,so it can have very high price.

8.short termism

Short termism means not sufficient resources are being allocated into capital goods.But if a country wants to deliver more consumer products in the future,some resources have to be delivered for making capital goods.If not,this can result in a lack of investment.

9.unfairness

Wide gap between the poor and rich.They can buy the thing at same price.Because they have different value of money.

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Alex G10-8

1. Abuse of Monopoly power: Market failure can arise due to producers having more market power than consumers. If one firm dominates a market, it may not be allocatively, productively or dynamically eff icient. It will lack competitive pressure to respond to consumer demands, to keep its costs low and to improve its product. If it is the only firm selling the product. For example, consumers will have no choice but to buy from it, even if the price of the product is high, the product does not meet the needs of the consumers and its quality is poor.
2. Demerit goods: Demerit goods are more harmful to consumers than they realise and they generate external costs. For example, cigarettes are a demerit good. Some people do not fully realise the damage smoking inflicts on their health. Their smoking also imposes costs on people around them by polluting the air, causing a number of them to develop cancer through passive smoking and generating litter
3. Merit goods: Merit goods are products that are more beneficial to the consumers than they themselves realise, and they have benefits for those who are not involved in their consumption directly, that is external benefits. Healthcare is an example of a merit good. For instance, some people may not recognise the importance of regular medical check-ups and/or visiting a doctor. Hence, they are unlikely to take into account the benefits of their fitness to others.
4. Information failure: For consumers to buy the products that will give them the highest possible satisfaction at the lowest possible prices, they have to be fully informed about the nature of the products on off er, the benefits they can receive from them and their prices. for example, if you a store to by a second hand car the seller will absolutely tell you that the car still has a good state. However he wont say the truth that maybe the car has been to the car repair station for a lot of times then you will get a car that you think is very new but actually not.

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One of the market failures is the underconsumption or underproduction of merit goods. This is due to the information failure, which means buyers and sellers do not have equal amount of information about a product. For example, education is a merit goods. The consumers may not know the full benefits of receiving education, or simply they cannot afford it. The lack of education causes positive externalities. So the government and private section should provide education altogether to make sure everyone can receive education.