4.1.8.3 Public goods, private and quasi-public goods

Question 1

Define a public good

Answer 1

A good that is non-excludable and non-rival in consumption

Question 2

Define non-excludable

Answer 2

Where it isn’t possible to prevent non-paying customers from consuming a good
- E.g. - once a lighthouse has emitted light all ships in the vicinity can use this light to avoid hazards at sea

Question 3

Define non-rival

Answer 3

Where one person’s enjoyment of a good doesn’t diminish another person’s enjoyment of a good
- E.g. - one person listening to a radio broadcast doesn’t diminish the quality of the signal to any other listener

Question 4

The free-rider problem

Answer 4

• Public goods = complete market failure - free market has no incentive to provide them
• In case of sea defences such as flood protection, coastal home owners would have an incentive to wait for their neighbour or others to fund flood protection - so it won’t be provided at all
• Individual consumers hope to a ‘free ride’ without paying for the benefit they enjoy

Question 5

Private goods

Answer 5

A good that is rival and excludable in consumption

• Opposite of public goods
• Non-players can be excluded from consuming a good, and that consumption by one person diminishes the enjoyment of the good by another

Question 6

Quasi-public goods

Answer 6

• A good that exhibits some, but not all, of the characteristics of a public good, i.e. it’s partially non-excludable and/or partially non-rival
• Depending on location and time of day - roads may be considered private goods, quasi-public goods or public goods