Incomplete information | Market failure

Incomplete information is regarded as one of all the market failures. Incomplete information means that resources might be allocated incorrectly.

Incomplete information means that the people in the economy not can take rational and optimal decisions, which they are assumed to take according to economic theories. Incomplete information means that the market economy does not work effectively.

In a market transaction, it may be that one part has more information than the other part, this is called asymmetric information. The most common information problems is moral hazard and adverse selection.