In neoclassical economics

Neoclassical economics

Neoclassical economics is a term variously used for approaches to economics focusing on the determination of prices, outputs, and income distributions in markets through supply and demand, often mediated through a hypothesized maximization of utility by income-constrained individuals and of profits...

, a market distortion is any event in which a market

Market

A market is one of many varieties of systems, institutions, procedures, social relations and infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers offering their goods or services in exchange for money from buyers...

 reaches a market clearing

Market clearing

In economics, market clearing refers to either# a simplifying assumption made by the new classical school that markets always go to where the quantity supplied equals the quantity demanded; or# the process of getting there via price adjustment....

 price for an item that is substantially different from the price that a market would achieve while operating under conditions of perfect competition

Perfect competition

In economic theory, perfect competition describes markets such that no participants are large enough to have the market power to set the price of a homogeneous product. Because the conditions for perfect competition are strict, there are few if any perfectly competitive markets...

 and state enforcement of legal contracts and the ownership

Ownership

Ownership is the state or fact of exclusive rights and control over property, which may be an object, land/real estate or intellectual property. Ownership involves multiple rights, collectively referred to as title, which may be separated and held by different parties. The concept of ownership has...

 of private property

Private property

Private property is the right of persons and firms to obtain, own, control, employ, dispose of, and bequeath land, capital, and other forms of property. Private property is distinguishable from public property, which refers to assets owned by a state, community or government rather than by...

.

In this context, "perfect competition" means:

• all participants have complete information
  Complete information
  Complete information is a term used in economics and game theory to describe an economic situation or game in which knowledge about other market participants or players is available to all participants. Every player knows the payoffs and strategies available to other players.Complete information...
  
  ,
• there are no entry
  Barriers to entry
  In theories of competition in economics, barriers to entry are obstacles that make it difficult to enter a given market. The term can refer to hindrances a firm faces in trying to enter a market or industry - such as government regulation, or a large, established firm taking advantage of economies...
  
   or exit barriers to the market,
• there are no transaction cost
  Transaction cost
  In economics and related disciplines, a transaction cost is a cost incurred in making an economic exchange . For example, most people, when buying or selling a stock, must pay a commission to their broker; that commission is a transaction cost of doing the stock deal...
  
  s or subsidies affecting the market,
• all firms have constant returns to scale, and
• all market participants are independent rational
  Rationality
  In philosophy, rationality is the exercise of reason. It is the manner in which people derive conclusions when considering things deliberately. It also refers to the conformity of one's beliefs with one's reasons for belief, or with one's actions with one's reasons for action...
  
   actors.

Many different kinds of events, actions, policies, or beliefs can bring about a market distortion.