Model of Product Displacement from the Market: Market Failure under Complete Information

The research investigates the analysis of some branch of the well-known adverse selection model. We study the price-cost ratio with the help of the economic-mathematical model of setting the market price of the product. Features that distinguish the studied model from the adverse selection model are given. It is shown that under certain initial conditions, the product can be pushed out of the market despite the existing demand for it, which characterizes the so-called market failure. It was established that the equilibrium “demand-supply” even in an almost perfect market is unstable, and self-regulation mechanisms do not work to stabilize the situation.