8.3 Public Goods, Private Goods, and Quasi-Public Goods

What are the characteristics of pure public goods

They are non-rival and non-excludable, meaning one person’s use doesn’t reduce availability to others, and people can’t be prevented from using them

Why do public goods cause market failure

Because of the free-rider problem, where people benefit without paying, leading to under-provision or no provision at all

What is the free rider problem

It occurs when individuals benefit from a good without contributing to its cost, discouraging private firms from providing the good

What is a private good

A good that is rivalrous and excludable, meaning consumption by one reduces availability for others, and people can be prevented from using it

What is a quasi-public good

A good that is partially rivalrous and excludable, typically provided by the government to ensure availability to the public but still allows for some competition in usage.

How can technology change the nature of goods

Technological advances can make previously public goods excludable, turning them into private or quasi-public goods

What is tragedy of the commons

Overuse or depletion of common resources, where individuals acting in self-interest harm overall availability

How does the tragedy of commons lead to market failure

No one has ownership or incentive to conserve shared resources, leading to overuse and eventual depletion