Consumer sovereignty and quasi-market failure

Abstract

This article explores the concept of quasi-market failure in order to develop a coherent and consistent critique of such quasi-market institutions as vouchers, contracting, and the Tiebout model. After discussing the use of consumer sovereignty as a criterion by which to assess failure, three sources of quasi-market failure are examined: failure in quasi-market formation, failure by preference error, and failure by preference substitution. Each is illustrated with examples from the empirical literature. The article concludes with a discussion of the implications of quasi-market failure both for quasi-markets and for justifying reliance on the more traditional progressive reform institutions of public-service provision and production.