Market Failure in the financial sector Flashcards
1
Q
Asymmetric Information
A
Financial institutions have more info than customers.
2
Q
Externalities
A
Number of costs on firms, and individuals that the financial market doesn’t pay e.g. bailing out the banks 2008
3
Q
Moral Hazard
A
Making decisions in their best interests knowing there are risks. e.g. Bankers taking risks to increase salary.
4
Q
Market Rigging
A
Where individuals collude to fix prices or exchange info. for gains.
