Market Failure Diagnostic Explorer | HealthEconomics.wiki

1. Choose a scenario

Use a preset or enter your own illustrative values. All figures represent value units for one additional unit of the good, service or action.

2. Enter marginal values

Values must be between 0 and 10,000. External costs and benefits represent effects on people outside the private transaction.

Private benefit Benefit considered by the decision maker. External benefit Benefit received by other people. Private cost Cost faced in the private decision. External cost Cost imposed on other people.

3. Follow the calculation

The numerical test isolates a private–social value wedge. Information problems and market power require additional evidence beyond these four values.

MSB = MPB + MEB
Marginal social benefit includes private and external benefits.

MSC = MPC + MEC
Marginal social cost includes private and external costs.

Private net benefit = MPB − MPC

Social net benefit = MSB − MSC

Incentive wedge = Social net benefit − Private net benefit

4. Compare the decisions

This result concerns the single marginal unit represented by the entered values. It is not an estimate of an entire market’s welfare loss.

Marginal social benefit—

Marginal social cost—

Private net benefit—

Social net benefit

Enter valid values to see the result.

The explorer compares whether the private and social decision would accept the marginal unit.

5. Identify the suspected mechanism

Choose the mechanism supported by the scenario’s evidence. A label alone is not proof that the mechanism causes a material welfare loss.

Market-failure mechanism

Evidence needed

Possible response to evaluate

Important limitation:

Diagnosis is not a policy verdict. Compare the existing market with realistic alternatives, including administrative costs, information requirements, distributional effects, behavioural responses and the possibility of government failure.

Equivalent results table

The table provides the same numerical information without relying on the visual result panel.

Measure	Formula	Value
Marginal social benefit	Private benefit + external benefit	—
Marginal social cost	Private cost + external cost	—
Private net benefit	Private benefit − private cost	—
Social net benefit	Social benefit − social cost	—
Private–social incentive wedge	Social net benefit − private net benefit	—