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Public vs private goods How digitalization can transform private goods into public goods (and vice versa)

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Presentation on theme: "Public vs private goods How digitalization can transform private goods into public goods (and vice versa)"— Presentation transcript:

1 Public vs private goods How digitalization can transform private goods into public goods (and vice versa)

2 HEC MONTRÉAL – MBA IT and E-Commerce Jacques Robert & Jean Talbot, HEC Montréal Different types of goods Good with exclusion: it is possible to exclude some from its consumption.Good with exclusion: it is possible to exclude some from its consumption. Good with rivalness : if one consume the good, it reduces the available quantity (or quality) for others.Good with rivalness : if one consume the good, it reduces the available quantity (or quality) for others. Private goods: goods with exclusion and rivalnessPrivate goods: goods with exclusion and rivalness Public goods: goods without exclusionPublic goods: goods without exclusion Club goods: goods with exclusion but without rivalnessClub goods: goods with exclusion but without rivalness

3 HEC MONTRÉAL – MBA IT and E-Commerce Jacques Robert & Jean Talbot, HEC Montréal Types of goods et examples Goods with exclusion Goods without exclusion Goods with rivalness Food, clothes, etc. Road, public concerts Goods without rivalness Pay (coded) TV TV, radio, national defense, police and security, lighthouses Private goods Public goods Club goods

4 HEC MONTRÉAL – MBA IT and E-Commerce Jacques Robert & Jean Talbot, HEC Montréal Public goods Important fixed costs, low or inexistent variable cost..Important fixed costs, low or inexistent variable cost.. Difficulty to prevent free riders from deriving benefits from the usage of the good.Difficulty to prevent free riders from deriving benefits from the usage of the good. Production and financing of public goods are often public choice issues.Production and financing of public goods are often public choice issues.

5 HEC MONTRÉAL – MBA IT and E-Commerce Jacques Robert & Jean Talbot, HEC Montréal How to finance public goods Modes of financing Inefficiencies Voluntary contributions Under financing – free rider effect Compulsory Taxation Negative effect of taxes Make the good with exclusion and impose access fees. Costs of limiting access, suboptimal consumption. Advertising Advertising annoyance

6 HEC MONTRÉAL – MBA IT and E-Commerce Jacques Robert & Jean Talbot, HEC Montréal Digital goods Definition: products that can be contained on a digital supportDefinition: products that can be contained on a digital support Information goods has been drastically transformed by the technology.Information goods has been drastically transformed by the technology. Napster and al. have transformed information goods (music) into public goods without exclusion nor rivalness.Napster and al. have transformed information goods (music) into public goods without exclusion nor rivalness. The music industry wish to keep music a product with exclusion: either through technology or law. Is this desirable ? Is this possible ?The music industry wish to keep music a product with exclusion: either through technology or law. Is this desirable ? Is this possible ?


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