Welfare, Market Failure and Decision Concepts

is a market situation where asymmetric information results in a party taking advantage of undisclosed information to benefit more from a contract or trade.

In economics, a moral hazard is a situation where an economic actor has an incentive to increase its exposure to risk because it will not bear the full costs associated with that risk.

In economics, a transaction cost is a cost incurred when making an economic trade when participating in a market.

In cognitive science and behavioral economics, loss aversion is a cognitive bias in which the same situation is perceived as worse if it is framed as a loss, rather than a gain.

In economics and business decision-making, a sunk cost (also known as retrospective cost) is a cost that has already been incurred and cannot be recovered.

In economics, deadweight loss is the loss of societal economic welfare due to production/consumption of a good at a quantity where marginal benefit (to society) does not equal marginal cost (to society).

The principal-agent problem (often abbreviated agency problem) refers to the conflict in interests and priorities that arises when one person or entity (the "agent") takes actions on behalf of another person or entity (the "principal").

In economics, an externality is a cost or benefit to an uninvolved third party that arises as an effect of another party's (or parties') activity.