Demerit Good. A demerit good has costs for the consumer who buys it but the consumer may be unaware of its full costs. A demerit good is over-consumed due to asymmetric information.
Demerit goods include drugs, smoking and gambling.
Market failure occurs because the good is over-consumed. The government must intervene to correct the market failure. The government could tax demerit goods to discourage their consumption, regulate the amount consumed, ban the good completely or advertise the costs of demerit goods.