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Types of Goods
Session 12
July 2018
Session Objectives
Types of goods
– Private goods
– Public goods
• Quasi public goods (merit goods)
– Non-rival private goods (club goods, artificially scarce
good)
– Common resources
• Tragedy of the commons
2
National Disaster warning system
Public goods
Have positive externalities
Characteristics –
Online education –
non-rival
Exclusion feasible
Main features Public goods Merit goods (tend to be
largely private goods)
Rivalry Non-rival rival
Veeru
Veeru
• Those who come too often will be denied, and everyone must wait nine
minutes before they can use the machine again.
24
Does public good have to be provided by the
government?
Is it possible to tie a public good with a private good?
Deadweight loss
$4
D
0 Q Q
MKT OPT
Quantity of pay-per-view movies watched
An artificially scarce good or non-rival private good is
excludable but nonrival in consumption.
– Computer software
– Pay-per view-movies
– Wi-fi (assuming there is no congestion)
Seinfeld – the parking space argument
38
Tragedy of commons
• Non-excludable but rival.
• You cant stop me from consuming the good
• And more I consume means less is available for you
• The resource depletes
• Enforcement of norms:
• Possible in small groups or majority people altruistic
• Overfishing - social disapproval.
• One who honors the norms is respected.
42
Private Goods
Excludable Non-excludable