What is market failure Essay Example

their product designs and range.

To remain competitive, companies must adapt to changing customer preferences and new competition by prioritizing cooperation with other competitors. Market research is crucial in this process as it involves gathering and interpreting business information related to newly introduced products. This helps producers understand the market, potential opportunities, and product viability. Market research answers questions such as identifying the target audience, determining optimal launch timing, and evaluating sales potential. Organizations that employ market research in their development process are more likely to succeed while those that don't face market failures (Cowen, 2000).

One of the main reasons for market failures is the problem of agency within cooperations. It is common to find that managers in such establishments prioritize their own interests over those of their shareholders, resulting in disloyalty. Such behavior can discourage shareholders, potentially leading to the closure of the business. This recurrent issue is linked to the way organizations structure their incentives and is a challenge that must be addressed.

Cowen (2000) states that if the directors, managers, and employees of a company misuse its resources, it can cause the business to close. To prevent this from happening, these individuals can be encouraged through different incentives - including moral, material, and coercive ones - to ensure their actions are in line with the organization's goals.

To mitigate the adverse effects of market failures on societal access to goods and services resulting from inefficiencies, public policies can be implemented. The government has an obligation to intervene and rectify such markets. One policy that may aid small businesses in competing with larger corporations is by offering incentives.

The high cost of

market research may prevent infant companies from conducting it. The government can address this issue by providing incentives to support research and development, such as product life cycle analysis, expansion into new markets, and related research that aids growth. Cowen (2000) recommends subsidies as a viable policy option for the government to provide financial assistance to producers and encourage more production and competitiveness in the market by allowing them to lower their prices.

Cowen (2000) suggests that offering subsidies to companies can motivate them to increase production and act as a form of protectionism, ultimately reducing agency problems and market failures caused by insufficient funding. Inefficient economies often experience market failures due to ineffective management strategies implemented by companies. To address these issues, it is necessary for the government to intervene and establish policies that assist companies in improving their performance.