An outcome deriving from the self-interested behaviour of individuals in the context of free trade , in which economic efficiency does not result.
Market failures provide a ubiquitous argument for intervention of some form or other.
But they have two main sources. First, they derive from the fact that many transactions which would need to occur for the sake of economic efficiency simply do not occur. This may be on account of transaction costs . Or, the necessary transaction may be deterred by the fact that the efficient price is not set - on account of menu costs . The second main category of market failures derive from the fact that there are sometimes collective interests that are unable to be served by self-interested, individual behaviour.