The ebook 'The Economy' from CORE Econ exemplifies a club good, which is a type of public good. It is considered a club good because access to it can be restricted (making it excludable), even though it is intentionally offered for free to teachers and students.

Example of an Excludable Public Good: CORE Econ's The Economy Ebook

The excludability of a good is not an inherent or fixed attribute, as it can be altered by various factors. These include technological advancements, changes in the legal system and governance, or societal choices about whether implementing exclusion is feasible or even desirable.

Dynamic Nature of Excludability

The information contained within a book protected by copyright serves as an example of an excludable public good. Although one person's access to the information does not prevent others from using it (non-rivalry), the copyright holder possesses the legal right to restrict access and require payment, thereby making the good excludable. [1, 7]

Example of an Excludable Public Good: Information in a Copyrighted Book

A film screening in a cinema with ample available seating is a type of excludable public good. It is non-rival because the cost to the cinema does not increase if an additional person watches the film. However, it is excludable because the owner can require the purchase of a ticket to grant admission. [1, 2]

Example of an Excludable Public Good: Film in an Uncrowded Cinema

Roads and bridges that require a toll for passage are classic examples of excludable public goods. These are considered non-rival as the marginal cost of an additional vehicle using them is effectively zero, at least until congestion becomes a factor. They are excludable because erecting a toll gate allows the operator to prevent access to drivers who do not pay the fee. [1, 3, 6]

Example of an Excludable Public Good: Toll Roads and Bridges

A private golf club can be seen as an example of a club good. If the golf course is not crowded, adding another member costs the club nothing, demonstrating non-rivalry. However, the club can still charge a membership fee to exclude non-paying individuals.

Example of a Club Good: Private Golf Club

Public roads and parks are examples of goods considered excludable because restricting access is possible in principle, for instance, by adding gates or toll booths. However, this exclusion is often not implemented, and they are typically available for public use without direct charge.

Example of In-Principle Excludability: Public Roads and Parks

A new online streaming service offers unlimited access to its library of thousands of classic films. Access is granted only to users who pay a monthly subscription fee. One subscriber watching a film does not prevent any other subscriber from watching the same or any other film. Based on these characteristics, how is this streaming service best classified?

A city government builds a new, large bridge that is designed to never experience traffic congestion. To fund its ongoing maintenance, the city installs an electronic tolling system and charges a fee for every vehicle that crosses. Analyze this situation by describing the two key economic characteristics of the bridge service. Specifically, address (1) how one person's use of the bridge impacts its availability for others, and (2) how access to the bridge is controlled.

Bridge Funding Strategy Analysis

Match each economic term for a type of good with the description that best fits its characteristics.

A city has just completed a large new public park. Within the park is a state-of-the-art botanical conservatory with high annual maintenance costs. The conservatory is large enough that one person's visit does not detract from another's enjoyment. To cover the maintenance costs, the city council proposes charging a significant entrance fee for the conservatory, while the rest of the park remains free. Evaluate this proposal from an economic perspective. In your evaluation, classify the conservatory based on its economic characteristics and discuss the primary arguments for and against implementing the entrance fee.

City Park Conservatory Funding Debate

A good that is excludable becomes a club good only when consumption by one person significantly reduces the amount available for others.

A software company invests millions in developing a comprehensive database of scientific research papers. Once created, the cost of providing access to an additional user is nearly zero. The company decides to sell access to this database through an expensive annual subscription, making it unavailable to many students and independent researchers. From an economic perspective, analyze the conflict between the characteristics of this database as a good and the company's pricing strategy. In your analysis, explain why this good can be described as 'artificially scarce'.

The Economics of Digital Information

Based on the case study below, evaluate the company's 'Pro' version of the software. First, identify the correct economic classification for the 'Pro' version, justifying your answer based on its two key characteristics. Second, explain why this type of pricing model is a logical business strategy for this category of good.

The 'Freemium' Software Model

A large municipal botanical garden, rarely crowded, was previously open to the public for free. To cover maintenance costs, the city has installed a fence and now charges an admission fee for entry. Explain how this policy change alters the economic classification of the garden. In your explanation, identify the new classification and justify it by describing the good's two key characteristics.

Reclassifying a Public Asset

An uncrowded public beach is open to everyone, and one person's enjoyment does not detract from another's. The local government then decides to fence off the beach and charge an entrance fee. Assuming the beach remains uncrowded, how does this action change the economic classification of the beach access?

A municipal library offers unlimited digital access to e-books. The library holds a multi-user license for its entire collection, meaning one person checking out an e-book does not prevent others from accessing the same title. To address a budget shortfall, the city council proposes introducing a mandatory annual subscription fee for this digital access. From an economic efficiency perspective, evaluate this proposal. Explain the classification of the digital library service (both before and after the proposed fee) and the primary economic drawback of implementing this change.

Digital Library Funding Strategy

An excludable public good, also referred to as a club good or an artificially scarce good, is characterized by being non-rival in consumption yet excludable in access. This means that one person's use does not diminish its availability to others, but it is possible to prevent individuals from consuming it. A good is defined as artificially scarce if it is non-rival, but some users are excluded from its use, either directly or because the price exceeds their willingness to pay.

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A public good is a product or service that exhibits non-rivalry, meaning one person's consumption does not diminish its availability for others. While non-rivalry is the key characteristic, these goods can be further classified. At one end of the spectrum are pure public goods, which are entirely non-rival and also non-excludable, making it impossible to prevent anyone from benefiting. Members of a group can often benefit from public goods regardless of their individual contributions, as seen in shared irrigation systems.

Public Good

To cite the ebook, use The CORE Econ Team 2023 The Economy 2.0: Microeconomics Open access e-text https://core-econ.org/the-economy/.

To cite a unit, use The CORE Econ Team 2023 The Economy 2.0: Microeconomics Open access e-text https://core-econ.org/the-economy/ Unit [unit number] (url).

CORE Econ - The Economy 2.0: Microeconomics

The irrigation game, where four farmers independently decide whether to fund a shared system, is a specific instance of a public good game. This scenario exemplifies a strategic interaction because each farmer's decision affects the payoffs for all others. It creates a social dilemma because any costly contribution benefits everyone, regardless of who paid, leading to an incentive to free-ride.

The Irrigation Game as an Example of a Public Good Game

Excludable Public Good (Club Good)

An open-access resource is a good that is rival or partially rival, so its consumption by one person reduces the benefits available to others. Simultaneously, it is non-excludable, meaning it is impossible to prevent anyone from using it.

Definition of an Open-Access Resource

Naturally occurring public goods, such as historically abundant fish stocks, are not subject to the free-rider problem that affects public goods produced by humans. [2] Since these resources exist without requiring human creation or maintenance, there are no production costs that individuals must contribute to, thereby removing the incentive to free-ride on the financial contributions of others. [1, 2]

Absence of Free-Rider Problem in Naturally Occurring Public Goods

A pure public good is defined by two distinct characteristics: it is entirely non-rival and non-excludable. Non-rivalry in this context means that the marginal cost of providing the good to an additional consumer is zero. Non-excludability signifies that it is impossible to prevent any individual from enjoying the benefits of the good.

Pure Public Good

The challenges associated with public goods and shared resources can be understood as instances of external effects. This occurs because the actions of individuals or firms do not account for the full social marginal costs and benefits of those actions, leading to inefficient outcomes.

Public Goods and Shared Resources Problems as Externalities

Actions taken by a single country to reduce its atmospheric carbon dioxide emissions create benefits that are shared by all countries. This makes the reduction of CO2 a global public good, as the positive effects are enjoyed by the entire international community, regardless of who undertook the costly measures.

Reductions in Carbon Emissions as a Global Public Good

Although the concepts of public goods and positive externalities are related and sometimes used interchangeably, a key distinction can be made based on the balance of private costs and benefits. A positive externality is not usually classified as a public good if the individual who provides it receives a significantly larger private benefit than other individuals. The term 'public good' is generally reserved for situations where the private cost of provision is high and the private benefit is low for any single person, creating a disincentive for any individual to provide it and leading to the potential for free-riding.

Distinguishing Public Goods from Positive Externalities

A free rider is an individual who benefits from the contributions that others make toward a cooperative project or public good without contributing to the costs themselves.

Free Rider

A view of a sunset is an example of an environmental public good. One person enjoying the view does not prevent or diminish the ability of others to enjoy it as well. As with other public goods, once the sunset is available to one person, the marginal cost of another person enjoying the view is zero.

Example of an Environmental Public Good: A Sunset View

The primary characteristic of a public good is non-rivalry, which means that its use by one person does not reduce its availability to others. In such cases, once the good is accessible to one individual, the marginal cost of making it available to additional people is zero. This is because potential users are not in competition with each other for the good.

Non-Rivalry and the Zero Marginal Cost of Public Goods

Radio broadcasting exemplifies a public good due to its non-rival nature. The total cost, C, to produce and transmit a specific program is fixed and does not depend on the audience size. Once the program is broadcast, anyone with a radio can listen without affecting the quality or availability for others. Since the total cost is constant regardless of the number of listeners, the marginal cost of providing the program to an additional person is zero. This principle applies to a specific program of a fixed type, length, and quality, and holds true whether the broadcaster is a public or private entity. [1]

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