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Why Traffic in Africa is due to Market Failure
1. Why Traffic in Africa is
due to market failure
by tijan watt
2.
3. Many people subscribe to a
libertarian model characterized by
Adam Smith's "Invisible Hand"
Market-based solutions optimal for
delivering certain commodity goods
In some instances, markets fail
5. The prisoner's dilemma was
described by John Nash, Nobel prize
winner in economics for his
contribution to Game Theory
He showed mathematically how
individual behavior could be
contrary to the collective best
interest
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12. Information asymmetry describes a
situation where one party has more
information than the other
In a transaction, the party that has the
information has an incentive to use it to
their advantage, leading to adverse selection
In situations of adverse selection, no deal
will be made
Costly signals are often used to overcome
information asymmetries
17. Monopoly is another form of market
failure
Efficient markets require complete
information and complete competition
Monopolies have no market
information and are incentivized to
under produce
Natural monopolies are structural in
some industries
21. Public goods are defined as non-rival
and non-excludable
Private members of a group do not
have an incentive to provide public
goods
free-ridership threatens collective
action
only external authorities with coercive
power can provide public goods
26. Tragedy of the commons is another
collective action problem
It is a consequence of public goods:
air, public spaces, etc.
no individual has incentive to incur
the cost for the collective interest
global climate change is a tragedy
of the commons
31. Fragmentation is a property of
complex systems
Chaotic complex systems are
theoretically impossible to predict
Emergent phenomena of complex
systems can create black swans
Coordination can provide quazi-
public goods within private industry