Economics of Imperfect Markets

(4 Credits)

The market is the main institution for the allocation of economic resources. It operates through a price mechanism that disseminates information to decision-makers – firms, consumers, and regulators – and coordinates their behavior. When it works well, it promotes an efficient allocation of resources. But markets can suffer from several imperfections: some markets can be missing, as for most externalities; they can be incomplete, for example in the financial sector; agents can be price-makers or hide information, and therefore prevent competition from promoting efficiency. The course will review in depth most of the sources of market failures and their consequences.