A framework on behavioural market failures

Original title: Typologi for adfærdsbaserede markedsfejl

In 2016, the Danish competition and consumer authority asked Copenhagen Economics in collaboration with iNudgeyou to develop a framework that allow a better understanding of behavioural problems and their solutions.

We invented a new concept labelled ‘behavioural market failure’ which is a market failure that is caused by behavioural aspects and cannot be explained by traditional economic text books. We find, that the reason for why behavioural market failures occur, are very much linked to the type of transaction in the respective market, e.g. automatic transactions via PBS in the case of cell phone subscriptions.

This study is unique in the sense that it is the first to present a comprehensive framework on behavioural market failures which are present across different types of markets and products.

The study is commissioned by the Danish Competition and Consumer Authority