Service Markets

Abstract

Market concepts and mechanisms are, systematically, supposed to apply equally to service activities, at least of course to market services (¹). Most economists consider that services are “products” the same way goods are, and that their prices are the result of the confrontation of demand and supply (or the simultaneous solution of demand and supply functions with specific characterics, e.g. in terms of income and price elasticities). Markets are determining prices (which equilibrate quantities demanded and supplied), and are, at the same time, producing information as concerns the state of the market, in terms of relative abundance or scarcity, i.e. as concerns the degree of adaptation of demand and supply. In order to be efficient, markets must be transparent, perfect or contestable,.. but even so, the cases in which market failures are likely to occur are well known.