do “Supply and Demand” dynamics NOT work (very/efficienty)?
Six types of market failure are Natural monopoly, Externalities, Public Goods, Asymmetric information, Moral hazard, and Transaction costs. A few examples: 1) Asymmetric information can result in adverse selection such as when A bank that sets one price for all its checking account customers runs the risk of being adversely selected against by its low-balance, high-activity (and hence least profitable) customers. Or It describes a situation where an individual’s demand for insurance (either the propensity to buy insurance, or the quantity purchased, or both) is positively correlated with the individual’s risk of loss (e.g. higher risks buy more insurance), and the insurer is unable to allow for this correlation in the price of insurance. This may be because of private information known only to the individual (information asymmetry), or because of regulations or social norms which prevent the insurer from using certain categories of known information to set prices (e.g. the insurer may
