If a pharmaceutical company knows that one of its products has a dangerous side effect but does not disclose that to its customers, then the market for that product is likely to fail due to

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When the pharmaceutical company has knowledge of the dangerous side effect but does not disclose it, it creates asymmetric information in the market. Asymmetric information occurs when one party has more information than the other, in this case, the pharmaceutical company has more information about the product than its customers. This lack of information leads to a market failure as consumers may unknowingly purchase and use the product, causing harm to themselves. This loss of consumer trust damages the reputation of the company and leads to a decrease in demand for the product, ultimately resulting in market failure.

If a Pharmaceutical Company Knows That One of Its Products