A significant market failure is the failure to produce some goods and services, despite being needed or wanted. Markets can only form under certain conditions, and when these conditions are absent markets may struggle to exist. The most extreme case of a missing market is the case of pure public goods.

Pure public goods clearly provide a benefit to the consumer, but, for several reasons, are unlikely to exist in a market economy. Examples of pure public goods include national defence, the police service, and street lighting. Because markets for these goods are not likely to form they are called missing markets and are considered a special case where demand exists, but supply is absent.