ER / Concepts
Public Goods
Created
Two questions
- Excludable? Can non-payers be stopped from benefiting? (Netflix: yes / street light: no)
- Rival? Does my use reduce what is left for others? (apple: yes / national defence: no)
| Excludable | Non-excludable | |
|---|---|---|
| Rival | Private good (household electricity, food) | Common-pool resource (fisheries, groundwater) |
| Non-rival | Club good (subscription database, uncongested toll road) | Public good (defence, basic science) |
Why underprovided
Non-excludable → free riding (“if others pay, I still benefit”) → people understate willingness to pay → private supplier can’t cover cost → .
Different problems, different responses
| Problem | Difficulty | Response |
|---|---|---|
| Public good | free riding | tax financing, collective provision |
| Common-pool | overuse / depletion | access rights, quotas, permits |
| Club good | congestion | user fees, access rules |
Publicly provided ≠ public good
The transmission grid is government-owned but excludable (access can be restricted) and potentially rival (congestion) → not a pure public good. Its key features: Natural Monopoly + network effects + coordination.
Links: Market Failure