Introduction

Abstract

The most appealing characteristic of the perfectly competitive market is perhaps the postulation that individually rational self-maximizing behaviors bring about group (Pareto) optimality. Hence the market is regarded as an effective means to allocate economic resources efficiently. However, a competitive market will fail to provide an efficient allocation mechanism if there exists an imperfect market structure, externalities, imperfect information, or public goods. These phenomena are prevalent in the current global economy. As a result, though the market is perceived to be the most effective instrument in conducting economic activities, it fails to guarantee its efficiency under many current conditions. Not only have inefficient market outcomes appeared, but gravely detrimental events—such as the worldwide financial crisis and catastrophe-bound industrial pollution problem—have also emerged under the conventional market system.