POSC 182 Lecture 22 2010

POSC 182 Lecture 22 2010 - POSC 182: Politics and Economic...

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POSC 182: Politics and Economic Policy Unit 3: Policy Tools and Divergent Economic Philosophies Lecture 22: Regulation February 26, 2010
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Market Failure Market Failure : When markets by themselves are unable to correct for over- or under-supply of goods or services. Types of Market Failures: Lack of Competition Monopoly Standard Oil Company controlled over 90% of oil by the early 1900s by constricting the use of oil pipes – Microsoft Windows (Microsoft must allow choice of web browsers in Europe) Unequal Bargaining Power – Workers may not be able to bargain on equal footing for certain conditions vis-à- vis large corporations OSHA regulates working conditions Lack of demand due to high prices: Infant industries – Demand for a product may emerge, but there may be high barriers to entry into a market if a country hasn’t achieved economies of scale to drive prices down to make it economical for people to buy a product – Airbus in Europe or Shipbuilding in Korea
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Market Failure Information Problems Information may be difficult/costly for consumers to obtain Drug safety requires testing new drugs on large numbers to identify the effects and side effects. Incomplete or misleading information • Firms may have an incentive to mislead people. Although the
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This note was uploaded on 10/05/2010 for the course POSC 182 taught by Professor Schuelenberg during the Spring '08 term at UC Riverside.

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POSC 182 Lecture 22 2010 - POSC 182: Politics and Economic...

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