4min chapter

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87. The Disruptive Potential of Online Marketplaces: A Conversation with Scott Kominers and Cliff Maxwell

The Disruptive Voice

CHAPTER

Market Failure - What Is the Exercise of Building a Market?

Markets fail to achieve their social potential because of ediosyncratic transaction friction. One reason that people don't necessarily get the used car market is because it's very local, and a buyer might not see the set of supply they actually want. The person who will represent a lemon as if it were really high quality when in fact drive it off the lot has got to collapse. And so that's a structural feature that drives market failure.

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