Question

How market system fails in the presence of ownership externality?

Answer 1

In economics, market failure is a situation in which the allocation of goods and services by a free market is not efficient, often leading to a net social welfareloss. Market failures can be viewed as scenarios where individuals' pursuit of pure self-interest leads to results that are not efficient – that can be improved upon from the societal point of view.[1][2]The first known use of the term by economists was in 1958,[3] but the concept has been traced back to the Victorian philosopher Henry Sidgwick.[4] Market failures are often associated with time-inconsistent preferences,[5] information asymmetries,[6] non-competitive markets, principal–agent problems, or externalities.[7]