Incomplete markets

An incomplete market is one where some of the necessary conditions for market formation exist, but not all of them. In the case of incomplete markets, some entrepreneurs may enter the market because profits are possible. However, the firms that do start-up will only satisfy a small proportion of potential demand. In these incomplete markets, total supply is insufficient to meet the needs of consumers. In such cases a market may form, but will fail to develop completely – in other words it is an incomplete.

There are several examples of incomplete markets, including the markets for quasi-public goods and merit goods.

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