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Inside economics, a market which runs under laissez-faire policies can be a free market. It is “free” inside the sense that the us government makes no try to intervene through fees, subsidies, minimum wages, price ceilings, etc. Market prices could be distorted by a seller or retailers with monopoly energy, or a customer with monopsony energy. Such price distortions may have an adverse effect on market participant’s welfare and reduce the efficiency of industry outcomes. Also, the relative level of organization and settling power of buyers and sellers significantly affects the functioning from the market. Markets where value negotiations meet stability though still do not arrive at desired outcomes for both sides are said to experience market failing.

Markets are a system, and systems have structure. System works fine when the structure of a system is in good shape. Structure of a (utopistically) well-functioning marketplaces is defined theoretically of perfect opposition. Well-functioning markets of the real world are never perfect, but basic structural characteristics can be approximated for real life markets, for example
many small buyers and sellers
buyers and retailers have equal access to information
products are equivalent

Buying and marketing in well-structured markets creates a cost that satisfies both buyers and retailers, not buying as well as selling alone because the free market proponents tells us. For example, trade unions are occasionally accused of spoiling the marketplace mechanims of a labour markets, in reality it is the opposite: blue collar business unions make the client and seller much more equally powerful when they negotiate the price for a working hour. When the customer and seller are usually equally powerful, then the price for a commodity is acceptable to both events.

Tags: market, markets, Mechanisms

  Jan 25 Uncategorized