Market Failure Research Articles

The Economic Importance of Industrial Cooperation and How It Affects the Pursuit of Economic Effectiveness

Worldwide economic environments are significantly shaped by industrial cooperation, which also affects the efficacy and efficiency of economic initiatives. This paper explores the complex aspects of industrial cooperation and how they affect economic effectiveness. Through an analysis of different types of cooperation, such as supply chain integration, joint ventures, and strategic alliances, this study clarifies the ways in which cooperation promotes competitiveness and economic progress. The study examines how industrial cooperation promotes innovation ecosystems, improves technological dissemination, and optimizes resource allocation through an interdisciplinary lens that draws from economics, management, and sociology. Additionally, it looks into how cooperation might lower transaction costs, promote economies of scale, and mitigate market failures. The research does, however, also recognize the difficulties and the negative effects of industrial collaboration, such as the expense of coordination, information asymmetry, and the possibility of anti-competitive activity. This article emphasizes how crucial it is to foster collaboration between various industries and businesses in the Republic of Uzbekistan in order to advance economic growth and pave the path toward modern society's well-being. Furthermore, pragmatic strategies for elevating creative processes to a new plane were taken into account. We looked at how various industrialization strategies at the national and international levels of the economy show up in real life as well as the policies that need to be put in place in our nation to go in this direction. The method's benefit is emphasized.

Deep energy efficiency renovation of Germany’s residential buildings: is this as economically viable as Germany’s policymakers and popular promoters often claim?

Germany needs to steeply increase the rate of deep energy-efficiency renovation of its old buildings, to meet climate goals. The government has long maintained that deep renovation to a specified “minimum” energy efficiency standard is economically viable: that the costs are paid back, through energy savings, over the technical lifetime of the energy-efficiency measures. Many private and public organisations support and promulgate this view. It accords with a stream of academic literature which suggests that the under-adoption of energy efficiency measures is a paradox indicating market failures and economically irrational behaviour by property owners. This paper offers cost–benefit analyses of 44 case study scenarios to test whether deep renovation in Germany pays back in monetary terms. These include both specific buildings and Germany-wide averages of classes of buildings. It uses current construction, finance and energy costs, and takes account of inflation, discount rates and opportunity costs. None of the scenarios are economically viable in monetary terms, and the average payback after 25 years is around 22.5%. Sensitivity analyses suggest payback would only be achieved using improbable parameter values. Energy-efficiency renovation is necessary but promoting it needs to take account of these realities.

Environmental regulation and environmental performance of enterprises: Quasi‐natural experiment of the new environmental protection law

AbstractWhether command‐control environmental regulation can play a positive role in circumstances of imperfect market incentive‐based environmental regulation remains rarely explored. Using the difference‐in‐difference model, we find that command‐control environmental regulation can significantly improve the environmental performance of heavily polluting firms. This result still holds after a sequence of robustness tests. The analysis of the economic mechanism indicates that the new environmental protection law mainly contributes positively to the environmental performance of high‐polluting firms by improving the quality of their environmental investments and pollution treatment disclosures, and by reducing the government subsidies they receive to improve the environmental performance of high‐polluting firms. Meanwhile, the new environmental protection law has a more pronounced impact on heavily polluting enterprises in the eastern region, with imperfect internal control, stronger environmental regulations, more distant political connections, greater pressure on regional GDP growth and weaker industry competition. This paper confirms the effectiveness of the new environmental law in improving environmental performance of heavily polluting enterprises in pursuit of carbon peaking and carbon neutrality goals, and provides new evidence to test the weak Porter hypothesis in the context of transition economies.

Did Facebook Cheat?: A Test Case of Antitrust Ethics

Citing corporate concentration and lax enforcement since the Reagan era, the Biden administration has declared a new era of aggressive antitrust prosecution, bringing antimonopoly actions against tech giants such as Meta, Google, and Amazon. But what’s so bad about monopoly or corporate concentration? The standard answer appeals to economic consequences, such as higher prices or deadweight losses. This paper offers a different framework. It argues monopolizing can be a form of cheating, which is a wrong that attaches to means, not just ends; an athlete who cheats but loses still does wrong. In particular, this paper argues that certain market-controlling strategies constitute a form of cheating I call ‘structural cheating,’ best illustrated by the metaphor of creating an unlevel playing field: rather than compete fairly on merits such as product quality and price, a firm that acquires rivals biases the market in its favor, thereby entrenching a dominant position that effectively forces would-be competitors to compete uphill. By framing (alleged) antitrust violations as cheating, while using the FTC’s lawsuit against Facebook (now Meta) as a test case, this paper provides a needed corrective to those citing market success as evidence of merit or skill. A further upshot is the structural cheating account better explains the distinctively problematic features of social media market concentration than Heath’s Market Failures Approach. More generally, this paper provides a normative lens for analyzing fair market competition and shows why it’s not only winning or losing that counts in capitalism, but how one plays the game.

Pension system design: roles and interdependencies of tax-financed and funded pensions

The purpose of this paper is to give an overview of the roles, objectives, and trade-offs in a two-pillar pension system consisting of tax-financed, public pensions and defined contribution, individual pensions. A pension system has many moving parts and our aim is to provide the reader with an understanding of how the parts interact and work together, a theme rarely addressed in the literature. In the first part of this paper, we give a qualitative overview of market failures, behavioural aspects, and distributional issues that form the background for a multi-pillar pension system design with mandatory components. In the second part of this paper, we present three thematic, quantitative analyses that illustrate fundamental relationship concerning wealth, inequality, insurance, and demographic changes. This paper also contains a detailed description of the agent-based model used for the analyses. The model is calibrated to Danish data, but the insights drawn from the model are of general validity.

A system dynamics approach for cost-benefit simulation in designing policies to enhance the cybersecurity resilience of small and medium-sized enterprises

The small and medium-sized enterprises (SMEs) with limited investment capacity are likely to be lax in enhancing their cybersecurity. Therefore, to strengthen cybersecurity at a national level, governments must intervene in the market by using support or regulatory policies to overcome market failures and address weaknesses. This study reviewed the efficiency of policy options to improve corporate cybersecurity resilience for SMEs that require government support, unlike large companies that can invest in security on their own. To achieve this, a causal loop diagram was created and analyzed from the perspective of system dynamics. The model incorporated government support variables and the decline in capabilities over time into the existing corporate security investment model reflecting the standard framework for cybersecurity from NIST. The simulation scenarios were constructed based on policy options considered by the Korean government. These include 1) pre-incident or post incident support services, and 2) management through tax credits and regulation. The results indicated that incentives, specifically tax credits, rather than regulation, were more effective in strengthening cyber resilience. This study describes the investment and internal capability development of a company affected by government policy, which is an external factor, and changes in profits can be observed by adding the company's profits and costs as variables. This profit variable allows for the comparison of a company's cyber resilience across scenarios. Additionally, if the government provides direct support immediately after a hacking incident, the company can recover more quickly. If these benefits are known and if the reporting of hacking damage is activated, cyber threat visibility will be secured by revealing hacking attacks that have been secretly conducted. Governments can use cyber threat visibility to strengthen national cybersecurity.

The Factors that Influencing the Success of the Village Cooperative Unit (Kud) Madani Beach Fisheries in Bantan District Bengkalis Regency, Riau Province

This research was conducted in 2023 at the Pantai Madani Fisheries Cooperative, Bantan District, Bengkalis Regency with the aim of: 1) Analyzing the success of the financial performance of the Pantai Madani Fisheries Cooperative in terms of financial ratios; 2) Knowing the factors that influencing the success of the Madani Beach Fisheries Cooperative. The method used in this research is a survey method using purposive sampling as a sampling technique that will be used as respondents. The number of respondents in this research is 25 cooperative members. The research results show that the current ratio is very good because the cooperative is able to cover its short-term liabilities, the solvency ratio on DER and DAR is in good condition where the cooperative's ability to cover its debts does not affect the management of cooperative assets and capital, the profitability ratio on ROE and also ROA is not good because activity has not been maximized, NPM is not good because sales are high but cannot produce large profits, NPM is not good because sales are high but cannot produce large profits, total turnover of receivable assets is very good, meaning the utilization of the activity ratio in receivables turnover is quite good, meaning that the collection carried out on assets is optimal to generate sales. The factors that influence the success of the Pantai Madani Fisheries Cooperative are economic scale, market failure, service benefits, profit generation in the area of value obtained from these variables 479,203/month, the value obtained is the quantitative value of goods and services from fishing activities that have been executed.

Climate policy integration as a process: from shallow to embedded integration

ABSTRACT Across many policy areas, policymakers try to integrate new policy issues into old policy processes. This is challenging. Getting to net-zero greenhouse gas emissions requires radical change across a broad range of societal sectors; thus, climate policy integration is essential. This article develops a new processual perspective on climate policy integration, allowing assessment, classification, and comparison of various stages of integration across policy processes, and over time. The integration process can be shaped by differing institutional logics. In a study of Norwegian agricultural policy, we identify three logics: multifunctional, market failure, and socio-technological transition. These portray differing frames, objectives, instruments, and sector involvement as appropriate ways of linking climate concerns to agricultural policy. We suggest that a shallow integration process is characterized by a sector-specific logic that facilitates discussions of policy frames and goals. In an embedded integration process, multiple logics are mobilized, and a broader range of policy elements are discussed: frames, goals, instruments, and sector involvement in the process. Consistent and contested integration processes are intermediate categories. Climate integration in Norwegian agricultural policy had the hallmarks of a shallow process in 2006–2009 but changed to a contested process in 2016–2021.

The financialisation of Crypto: Designing an international regulatory consensus

Bitcoin was presented in 2008 as a technology-driven alternative to the weaknesses of the traditional monetary, payment and financial systems dramatically highlighted by the Global Financial Crisis of 2008. The underlying technology – blockchain and distributed ledger technology – was posed as a technological solution to the problems of trust, confidence, transparency and behaviour traditionally addressed in finance through a framework of law, regulation and institutions (including markets and the state). Cryptocurrencies, blockchain, distributed ledger technology and decentralised finance were designed to address the weaknesses and risks in traditional finance. Yet fifteen years of evolution culminating in the Crypto Winter of 2022–23 have demonstrated that crypto is neither special nor immune and has come to feature all the classic problems of traditional finance. As the crypto ecosystem has evolved, the market failures and externalities of traditional finance have emerged – a process we term the ‘financialisation’ of crypto. These include conflicts of interests, information asymmetries, centralisation and interconnections, over-enthusiastic market participants, plus agency, operational and financial risks. We argue that (a) in order to develop successfully going forward, the crypto ecosystem needs to assimilate the centuries of experience of underpinning traditional finance with law and regulation, and (b) in the aftermath of the Crypto Winter, an international consensus is crystalising in respect of the regulation of the crypto ecosystem. We argue regulatory systems are now being instituted to ensure the proper functioning of crypto and its interconnections with traditional finance. The lessons of the financialisation of crypto also apply more broadly: appropriately designed regulatory systems are central to financial market functioning and development.

Transmission planning in an imperfectly competitive power sector with environmental externalities

Policymakers face the challenge of integrating intermittent output from variable renewable energy (VRE). Even in a well-functioning power sector with flexible generation, producers’ incentives may not align with society’s welfare-maximisation objective. At the same time, political pressure can obstruct policymakers from pricing damage from CO2 emissions according to its social costs. In facilitating decarbonisation, transmission planning will have to adapt to such economic and environmental distortions. Using a Stackelberg model of the Nordic power sector, we find that a first-best transmission-expansion plan involves better resource sharing between zones, which actually reduces the need for some VRE adoption. Next, we allow for departures from perfect competition and identify an extended transmission-expansion plan under market power by nuclear plants. By contrast, temporal arbitrage by hydro reservoirs does not necessitate transmission expansion beyond that of perfect competition because it incentivises sufficient VRE adoption using existing lines. Meanwhile, incomplete CO2 pricing under perfect competition requires a transmission plan that matches hydro-rich zones with sites for VRE adoption. However, since incomplete CO2 pricing leaves fossil-fuelled generation economically viable, it reduces the leverage of strategic producers, thereby catalysing less (more) extensive transmission expansion under market power by nuclear (hydro) plants.

Managing circular ecosystems in imperfect contexts – the case of extractive fishing in the Brazilian Amazon region

Purpose This study aims to answer the question of how to structure a circular ecosystem for extractive fishing in the Amazon region. It explores possibilities for implementing a circular ecosystem management model in an imperfect market with low technological availability, high informality and limited public assistance. Design/methodology/approach Qualitative approach was adopted for this paper, with a case study on extractive fishing in the state of Amazonas. Data was collected through 35 interviews and direct observation of the processes of collecting, storing and transporting fish on two routes: Tapauá-Manaus and Manacapuru-Manaus. Findings Through the data collected, it was possible to observe the importance of an orchestrating agent – such as an association or even a public authority – for the establishment and development of a circular ecosystem for extractive fishing in the region. Research limitations/implications The paper makes theoretical contributions by presenting how a circular ecosystem management model could be implemented for an imperfect market in the Global South, as well as contributing to the literature on how the circular economy contributes to mitigate the threat to biodiversity posed by the linear economy. Practical implications It contributes to the management practice of structuring circular ecosystems. Social implications The role of public authorities and the collective organization of fishermen as orchestrators connecting the network of actors that develop the extractive fishing ecosystem is fundamental, guaranteeing effective social participation in solving local problems. Originality/value The idea of circular ecosystems was applied to imperfect contexts, with high informality, weak institutions and bioeconomy, topics still little explored in the literature.

The role of imperfect market structure in the employment effect of emissions trading scheme in China: A theoretical extension and empirical investigation

The Chinese government aims to balance employment stabilization and emissions reduction when it initiates an emissions trading scheme (ETS) to control carbon emissions. However, the policymakers should not neglect the role of imperfectly competitive market structure and market power from incumbent firms. In view of this, classical framework of Berman and Bui's (2001) is extended in this paper to clarify the theoretical mechanism of employment effect of the ETS considering firm-level market power. In addition, based on the firm-level panel data from 2008 to 2019 of China, the employment effect of each pilot ETS is measured with the method of difference-in-difference-in-differences. Then a moderating effect model is established to verify the role of firm-level market power on the heterogeneous employment effect among the pilot ETSs. Moreover, the employment effect is further decomposed to evaluate the influential mechanism from the perspective of firms’ strategic behavior. It is found that there is negative employment effect of China's ETS policy, due to the significant moderating role of firm-level market power. This decrease in labor demand is mainly dominated by a negative output effect rather than a positive substitution effect because strategic allowance sellers with stronger market power tend to hire fewer employees to reduce carbon emissions by controlling production scale. However, the heterogeneity of policy effects resulted by market structure is also identified in different pilot regions. Employment dividend has been found in Beijing and Tianjin where strategic allowance buyers manipulate the carbon market and hire more employees to consolidate their market power. Therefore, policymakers should improve the design of the ETS to overcome the adverse employment effect duo to the region-specific market structure.

Why We Should Reexamine the "Golden Age" of Antibiotics in Social Context.

Economics is the primary discipline used to understand supply chain design, scale-up, and management. For example, antibiotics can be compared to other forms of "tragedy of the commons," whereby a common good (effective treatment of infections) is jeopardized by individual consumption and lack of community oversight and stewardship. While economic analysis can explain innovation decline in terms of market failure, one pitfall of an early-stage focus on research and development is a failure to challenge the discovery narrative. Ethics also has a distinct place in helping us envision alternatives to what markets can produce. This article advances a more contextualized view of how science and technology policy has shaped antibiotic supply chains over many years, emphasizing how shifting the story we tell about past successes is central to securing a reliable antibiotic supply chain in the future.

Repowerment beyond empowerment: collaborative accountability of citizens, corporations and civil servants

PurposeThis article conceptualizes and constructs a comprehensive framework that can better help to answer that question – Who is accountable for social and public problems? – theoretically and practically.Design/methodology/approachTracing the drivers behind two phenomena “accountability hole” and “accountability black hole”, stemming from “pushing power game” and “pulling power game”, respectively, this study considers (1) the three actors of society: citizens (civil society), corporations (market) and civil servants (government), and (2) the principal-agent relationship between the three actors in the face of social and public problems. As a result, the 4CAs framework that contains the three actors’ collaborative accountabilities to one another is presented.FindingsThe 4CAs model emphasizes (1) all three actors function as agents that are accountable to one another, (2) collaborative accountability beyond collaborative governance and (3) repowering citizens and corporations beyond just empowering them, i.e. returning their inherent rights and obligations to serve one another.Originality/valueThe 4CAs model may function as a descriptive and prescriptive lens through which the trilemma between market failure, government failure and citizen failure can be re-assessed and balanced. The model can also be used as a set of indicators for assessing and helping a society to better resolve the social and public problems collectively.

Smallholder farmers’ dissatisfaction with contract farming: a gendered perspective

ABSTRACT This study investigates the drivers of farmers’ dissatisfaction with market-specification contracts for finger millet crop in Kenya. The researcher analysed data from 336 farmers contracted by USOMI, out of which a sub-sample of 146 farmers who grew millet in 2021 was analysed using a probit model and descriptive analysis approach, which showed that asymmetric information related to the role of the contracting firm, lack of adequate understanding of the contract, poor pricing, and input market imperfections are some of the critical constraints and sources of dissatisfaction in the commercialisation of millet farming in Western Kenya. On the other hand, farmers’ satisfaction is driven by access to market and reasonable prices offered by the spot market traders. While the study found out that productivity and pricing were not gendered, it was observed that women were generally satisfied with contract farming. Consequently, contractual schemes should integrate complementary factors such as input provision. While the results do not show explicit benefits to women farmers, they do allow for the backing of contract farming in rural development programs to reduce gender inequalities.

Ghosts in the Machine: How Big Data Analytics Can Be Used to Strengthen Online Public Procurement Accountability

The core of sustainable public procurement lies in its ability to stem uneconomical public expenditures that waste taxpayer money and stifle social trust and development. The external audit of public procurement proves problematic since current research fails to provide sufficient empirical studies aimed at identifying procurement fraud. The development of online portals with embedded e-procurement solutions, along with the big data revolution, open new horizons and allow us to reveal trends otherwise impossible to spot, such as transactions achieved in an exclusive commercial relationship, in which a vendor engages only with a single public entity. By using innovative data acquisition techniques, our research encompasses 2.25 million online direct public procurement procedures conducted in 2023 using the Romanian portal for public procurement, totaling EUR 3.22 billion. By aggregating databases obtained from various public sources, our analysis achieved remarkable granularity, using over 112 million data elements—50 pertaining to each transaction. Research results indicate a unique sub-population of public procurement procedures—those conducted with “in-house” vendors totaling 14.28% of all direct public acquisitions and which is significantly differentiated along the entire list of analyzed criteria—financial, geographical, statistical, or risk-wise—illustrating a troubling phenomenon: possible gerrymandering of the online public procurement landscape, which, at least in theory, resembles a perfect market, by cultivating preferential commercial relations, thus affecting the legality, regularity, and economical aspects of public procurement.

Does “Made in China 2025” work for China? Evidence from Chinese listed firms

Economic theories have shown that industrial policy's effectiveness in fostering innovation hinges on its ability to address market failures, stimulate creative destruction, and avert adverse foreign reactions. Conversely, distortions induced by the policy and foreign countermeasures can impede its success. In this paper, we use information extracted from Chinese listed firms' financial reports and a difference-in-differences approach to examine how the “Made in China 2025” policy initiative has impacted firms' innovation and productivity outcomes. Our findings reveal that while targeted firms by the policy seem to receive increased innovation subsidies and display some indications of a heightened R&D/sales ratio, statistically significant improvements in patenting and productivity are lacking. These results cast doubt on the efficacy of the “Made in China 2025” initiative in achieving its intended goal of promoting the innovation capability of targeted firms, highlighting the theoretical and practical complexities of innovation-focused industrial policies.

ANALYSIS OF THE MARKETING MIX STRATEGY (7P) TO INCREASE SALES OF PROCESSED CASSAVA PRODUCTS AT UD "PURNAMA JATI" MEMBER

One of the leading producers and exporters of cassava in the world is Indonesia. Jember Regency is one of the highest cassava production centers in East Java, with an annual production capacity of 9,492 tons. This processed tape food product, typical of Jember Regency, is produced from the high supply of cassava. There is a need to find processed cassava products considering the high interest in tape products because of their unique quality, so this product is much more popular as souvenirs or souvenirs typical of Jember. The research aims to perfect marketing tactics and determine how the marketing mix (7P) influences consumer decisions in purchasing processed cassava products from UD Purnama Jati Jember. Questionnaire methodology is a technique for collecting information through statements or questions asked to respondents. Because the p-value is smaller than 0.05, product, price, place, and employees influence the results of consumer purchasing decisions at UD Purnama Jati. However, because the p-value is more significant than 0.05, we can rule out the possibility that factors related to the product process, physical evidence, or advertising influence consumers' final purchasing decisions

Index Insurance for Forage, Pasture, and Rangeland: A Review of Developed (USA and Canada) and Developing (Kenya and Ethiopia) Countries

Index insurance for forage, pasture, and rangeland has gained ground in policy and academic circles. Stakeholders promote it as an innovative risk management tool for enhancing resilience to drought-induced perils and providing a way for consumption smoothing to livestock producers in drought vulnerable ecosystems. Index insurance, which avoids market failures such as moral hazard, adverse selection, and transactional cost, has been piloted and implemented all over the world. To support future development and research on index-based insurance in livestock systems, operational index insurance for forage, pasture, and rangeland systems in developed (USA and Canada) and developing (Kenya and Ethiopia) countries are reviewed and compared. This paper finds some similar characteristics (huge subsidy payments—ranging from 50 to 100 percent, significant government role, low adoption, insufficient payouts, data challenges, etc.), of this product between the two regions. A major difference between the PRF and NDVI is the number of choices available to users of rainfall index insurance who face close to 3000 choice options, while NDVI users have less than 5 choice options available for them. Based on these insights, we highlight opportunities where the two regions can benchmark and improve upon their respective index insurance schemes—index-based livestock insurance (IBLI) in developing and rainfall index insurance for forage in developed regions.

Assessing Clinician Utilization of Next-Generation Antibiotics Against Resistant Gram-Negative Infections in U.S. Hospitals : A Retrospective Cohort Study.

The U.S. antibiotic market failure has threatened future innovation and supply. Understanding when and why clinicians underutilize recently approved gram-negative antibiotics might help prioritize the patient in future antibiotic development and potential market entry rewards. To determine use patterns of recently U.S. Food and Drug Administration (FDA)-approved gram-negative antibiotics (ceftazidime-avibactam, ceftolozane-tazobactam, meropenem-vaborbactam, plazomicin, eravacycline, imipenem-relebactam-cilastatin, and cefiderocol) and identify factors associated with their preferential use (over traditional generic agents) in patients with gram-negative infections due to pathogens displaying difficult-to-treat resistance (DTR; that is, resistance to all first-line antibiotics). Retrospective cohort. 619 U.S. hospitals. Adult inpatients. Quarterly percentage change in antibiotic use was calculated using weighted linear regression. Machine learning selected candidate variables, and mixed models identified factors associated with new (vs. traditional) antibiotic use in DTR infections. Between quarter 1 of 2016 and quarter 2 of 2021, ceftolozane-tazobactam (approved 2014) and ceftazidime-avibactam (2015) predominated new antibiotic usage whereas subsequently approved gram-negative antibiotics saw relatively sluggish uptake. Among gram-negative infection hospitalizations, 0.7% (2551 [2631 episodes] of 362 142) displayed DTR pathogens. Patients were treated exclusively using traditional agents in 1091 of 2631 DTR episodes (41.5%), including "reserve" antibiotics such as polymyxins, aminoglycosides, and tigecycline in 865 of 1091 episodes (79.3%). Patients with bacteremia and chronic diseases had greater adjusted probabilities and those with do-not-resuscitate status, acute liver failure, and Acinetobacter baumannii complex and other nonpseudomonal nonfermenter pathogens had lower adjusted probabilities of receiving newer (vs. traditional) antibiotics for DTR infections, respectively. Availability of susceptibility testing for new antibiotics increased probability of usage. Residual confounding. Despite FDA approval of 7 next-generation gram-negative antibiotics between 2014 and 2019, clinicians still frequently treat resistant gram-negative infections with older, generic antibiotics with suboptimal safety-efficacy profiles. Future antibiotics with innovative mechanisms targeting untapped pathogen niches, widely available susceptibility testing, and evidence demonstrating improved outcomes in resistant infections might enhance utilization. U.S. Food and Drug Administration; NIH Intramural Research Program.