Market Failure

Mainstream economic analysis widely accepts a market failure (relative to Pareto efficiency) can occur for three main reasons:

if the market is "monopolised" or a small group of businesses hold significant market power,

if production of the good or service results in an externality, or

if the good or service is a "public good".

http://en.wikipedia.org/wiki/Market_failure

http://www.iser.osaka-u.ac.jp/~saijo/lec/micro/02/lec-note.pdf