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Public Goods and Common Property

Public Goods and Common Property. Public Goods. Nonrival -- quantity available to other people does not fall when someone consumes it Nonexcludable -- prohibitively expensive to provide the good only to people who pay for it. Public Good . Public Good.

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Public Goods and Common Property

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  1. Public Goods and Common Property

  2. Public Goods • Nonrival -- quantity available to other people does not fall when someone consumes it • Nonexcludable -- prohibitively expensive to provide the good only to people who pay for it

  3. Public Good

  4. Public Good • In graph, private market would not produce Q=1 because no individual consumer would pay MSC. Once firm has produced product, it can’t exclude others who might enjoy it • Consumers could cooperatively purchase Q=1, but there is the free rider problem

  5. Tragedy of the Commons • Fishing experiment • Rival, but not excludable • Property Rights as solution • Social norms as alternative to property rights

  6. Drawbacks of private property rights • High costs of defining or enforcing property rights • Difficulty of charging for use • High transactions costs • Fairness

  7. Four Categories of Goods • Private Goods • Rival and excludable • Public Goods • Nonrival and nonexcludable • Common Resources • Nonexcludable, but rival • Natural Monopolies • Excludable but nonrival

  8. Discussion • Classify the following • Police protection • Education • The Internet • Globally • Web access at the Colleges • Why does government provide items that are not public goods?

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