Market failure in cybersecurity occurs when the free market does not efficiently allocate resources to protect digital assets, leading to underinvestment in security measures. This happens because individuals or organizations may lack sufficient incentives to invest in cybersecurity, as the benefits of protection often spill over to others (positive externalities), or because they underestimate the risks. As a result, vulnerabilities persist, making systems more susceptible to cyber attacks. Market failures in cybersecurity often justify government intervention, such as regulations, standards, or incentives, to ensure a baseline level of protection and to address issues that the market alone cannot resolve.