Market Failure and Financial Services – A Case Study of Bounded Rationality in the Market for Superannuation Products

Like most Western governments, the Australian Government has adopted a free market approach to the financial services industry, relying on the market to resolve which financial products and services are produced and consumed, and at what price. However, a consumer protection regime exists in recognition of potential market failures around information asymmetry and market power. This article argues that market failures appear to persist despite this disclosure-centric regime and demonstrates this using recent fees research. It goes on to discuss the reasons for this market failure and some possible solutions