Chapter 17: Public Goods and Common Resources

Common resource

A common resource is nonexludable and rival in consumption: you can't stop me from consuming a good, and more consumption by me means less of a the good is available for you.

Excludable

A good is excludable if the supplier of that good can prevent people who do not pay from consuming it.

Nonrival in consumption

A good is nonrival in consumption if more than one person can consume the same unit of the good at the same time.

Rival in consumption

A good is rival in consumption if the same unit of the good cannot be consumed by more than one person in at the same time.

Private good

A good that is both excludable and rival in consumption is a private good.

Public good

A public good is both nonexcludable and nonrival in consumption.

Artificially Scarce Good

An artificially scarce god is excludable but nonrival in consumption.

Overuse

Common resources left to the market suffer from overuse: individuals ignore the fact that their use depletes the amount of the resource remaining for others.

Cost-benefit analysis

Cost-benefit analysis is the estimation and comparison of the social costs and social benefit of providing a public good.

Free-rider problem

Goods that are nonexludable suffer from the free-rider problem: many individuals are unwilling to pay for their own consumption and instead will take a "free ride" on anyone who does pay.

Nonexcludable

When a good is nonexludable, the supplier cannot prevent consumption by people who do not pay for it.