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Category: Business and Industry
Date Submitted: 10/02/2014 05:30 PM
Publics Goods and Tragedy of the Commons
Chapter Outline
Four types of goods Private goods and public Goods Nonrival private goods Common resources and the tragedy of the commons
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Introduction
Probability of death by asteroid is about the same as death by airliner crash. Asteroids can be deflected.
• But there is no market for asteroid deflection. Why?
Asteroid Toutatis
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Introduction
Consider paying $100 for jeans.
• You get exclusive use of the jeans. • If you don’t pay for the jeans you don’t get them.
Consider paying $100 for asteroid protection.
• If enough people pay, the asteroid will be deflected without your $100. • If enough people do not pay and you pay $100, you get no protection. • Result: Whether you pay or not, you will get the same amount of protection.
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Introduction
Markets are able to produce private goods in efficient quantities.
• Jeans are an example of a private good.
Markets are unlikely to produce public goods in efficient quantities.
• Asteroid protection is an example of a “public good”
The difference in these goods is the subject of this chapter.
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Four Types of Goods
Jeans are excludable and asteroid deflection is nonexcludable. Nonexcludable – means people who don’t pay cannot be easily prevented from using the good. Jeans are rival and asteroid deflection is nonrival Non-Rival – means one person’s use of the good does not reduce the ability of another person to use it.
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Four Types of Goods
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Private Goods and Public Goods
Private goods are excludable and rival:
• Someone who doesn’t pay, doesn’t get it. • Creates an incentive to pay for and produce • Because the private goods are rival and excludable, the market output is efficient.
Public goods are nonexcludable and nonrival:
• Difficult to get people to pay for public goods voluntarily. • Markets will underprovide public goods.
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Private Goods and Public Goods
Mosquito...