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Public Goods and Common Property

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Presentation on theme: "Public Goods and Common Property"— Presentation transcript:

1 Public Goods and Common Property

2 Public Goods Nonrival -- quantity available to other people does not fall when someone consumes it Nonexcludable -- prohibitively expensive to provide the good only to people who pay for it

3 Public Good

4 Public Good In graph, private market would not produce Q=1 because no individual consumer would pay MSC. Once firm has produced product, it can’t exclude others who might enjoy it Consumers could cooperatively purchase Q=1, but there is the free rider problem

5 Tragedy of the Commons Fishing experiment Rival, but not excludable
Property Rights as solution Social norms as alternative to property rights

6 Drawbacks of private property rights
High costs of defining or enforcing property rights Difficulty of charging for use High transactions costs Fairness

7 Four Categories of Goods
Private Goods Rival and excludable Public Goods Nonrival and nonexcludable Common Resources Nonexcludable, but rival Natural Monopolies Excludable but nonrival

8 Discussion Classify the following
Police protection Education The Internet Globally Web access at the Colleges Why does government provide items that are not public goods?

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