A Study on the Causes and Regulation of Data Market Failure
Xiannian Deng, Yong Heng Shi · Procedia Computer Science · 2025
In general economic theory, market failure refers to a situation in which market mechanisms are unable to allocate resources efficiently or achieve socially desirable outcomes. As information technology and the digital economy continue to advance, data has become a new factor of production, leading to the rise of data markets that are increasingly exposed to unique forms of market failure. This paper begins by clearly defining what constitutes data market failure and systematically explores its root causes, including the special characteristics of data as a commodity, the external effects arising from its production and use, and behavioral factors such as limited rationality and the privacy paradox. The analysis shows that data markets have structural features and patterns of operation that differ significantly from those of traditional goods markets. Therefore, existing economic theories—especially those addressing market failure and institutional design—need to be revised and expanded to better reflect the unique role of data in modern economies.