situations in which free competition and the effects of supply and demand do not operate (e.g. monopolies and oligopolies, and externalities).
The systematic overproduction or underproduction of some goods and services that would occur in an unregulated market system when problems such as public goods, externalities, or imperfect competition are present.
(Hackett, 1998, chapter 3). Occur when any of the conditions required for a well-functioning competitive market are not met. Examples include monopolization or cartelization of markets, the presence of significant positive or negative externalities, or poorly informed buyers.