Examining the Role of Government Intervention in Market Failure and Government Failure

Abstract

This study investigated the role of government intervention in market failure and government failure during the card debt crisis in Taiwan. To achieve this goal, data related to information asymmetry was collected and combined with adverse selection and moral hazard data to confirm if market failure existed. Based on the confirmation of market failure, the study examined if government interventions could improve the market failure or, conversely, lead to government failure. Through constructing the research model and testing the research hypotheses related to market failure and government failure, the results showed that government interventions were essential to solve the card debt crisis under information asymmetry or market failure. The conclusions also implied that policymakers needed to employ resilient responses to improve the crisis in time, but never fell into the controversies of liberalism or protectionism.