Chapter 15
Challenges to Efficient Outcomes
Book
Version 3
By Boundless
By Boundless
Boundless Economics
Economics
by Boundless
Section 1
Sources of Inefficiency
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Asymmetric Information: Adverse Selection and Moral Hazard
Asymmetric information, different information between two parties, leads to the following - adverse selection, moral hazards, and market failure.
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Principle-Agent Problem
The principle-agent problem (agency dilemma) exists when conflicts of interest arise between a principal and an agent in a business setting.
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Public Choice: Median Voters and Inefficient Voting Outcomes
Public choice may not lead to an economically efficient outcomes due to who votes, why they vote, and in what system they vote.
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Behavioral Economics: Irrational Actions
Behavioral economics is the study of the effects of social, cognitive, and emotional facts on the financial decisions of individuals and institutions.
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Government Failure
Government failure occurs when possible interventions are not analyzed before action is taken regarding market inadequacies.
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