How does imperfect information lead to market failure?
Since market prices reflect all available information, if some of that information is wrong, then the pricing would be wrong in some respect also and a market failure (inefficient allocation of resources) could occur. So for example, the commodity market for coffee is highly dependent on weather forecasts and crop estimates from a few people who go around inspecting the coffee plantations. If this information were missing or wrong (weather forecasts are often wrong), then the price of coffee might be too high or low for the actual crop that will be picked.
