Why Traffic in Africa is
due to market failure
by tijan watt

Many people subscribe to a
libertarian model characterized by
Adam Smith's "Invisible Hand"
Market-based solutions optimal for
delivering certain commodity goods
In some instances, markets fail

Prisoner's
Dilemma

The prisoner's dilemma was
described by John Nash, Nobel prize
winner in economics for his
contribution to Game Theory
He showed mathematically how
individual behavior could be
contrary to the collective best
interest

Talk
Say nothing
0 years
10 years
Talk
Say nothing
0 years
10 years
Talk
Say nothing
5 years
1 year
doing time

centenaire
corniche
4.8 km
7.8 km
= 18 min
= 22 min

Information
Asymetry

Information asymmetry describes a
situation where one party has more
information than the other
In a transaction, the party that has the
information has an incentive to use it to
their advantage, leading to adverse selection
In situations of adverse selection, no deal
will be made
Costly signals are often used to overcome
information asymmetries

Costly Signals

Monopoly

Monopoly is another form of market
failure
Efficient markets require complete
information and complete competition
Monopolies have no market
information and are incentivized to
under produce
Natural monopolies are structural in
some industries

Public Goods

Public goods are defined as non-rival
and non-excludable
Private members of a group do not
have an incentive to provide public
goods
free-ridership threatens collective
action
only external authorities with coercive
power can provide public goods

Public

Private

Tragedy of
the Commons

Tragedy of the commons is another
collective action problem
It is a consequence of public goods:
air, public spaces, etc.
no individual has incentive to incur
the cost for the collective interest
global climate change is a tragedy
of the commons

Commons

Syecomp

Fragmentation

Fragmentation is a property of
complex systems
Chaotic complex systems are
theoretically impossible to predict
Emergent phenomena of complex
systems can create black swans
Coordination can provide quazi-
public goods within private industry

Market-based
Solutions
Pure Public
Goods
Innovation
National
Security
Water
Currency
Police
Factories
Shopping
Malls
Agricultu
re
Platforms
Identity
Distribute
d Energy

Special Thanks
The Clayton Christensen Institute
Improving the world through disruptive innovation
Harvard Business School

Supporting world class entrepreneurs
solving Africa’s biggest challenges
through innovation
thank you!