Key Concepts and Summary

Key Concepts and Summary

A public good has two key characteristics: it is nonexcludable and nonrivalrous. Nonexcludable means that it is costly or impossible for one user to exclude others from using the good. Nonrivalrous means that when one person uses the good, it does not prevent others from using it. Markets often have a difficult time producing public goods because free riders will attempt to use the public good without paying for it. The free rider problem can be overcome through measures to assure that users of the public good pay for it. Such measures include government actions, social pressures, and specific situations where markets have discovered a way to collect payments.

Glossary

free rider

those who want others to pay for the public good and then plan to use the good themselves; if many people act as free riders, the public good may never be provided

nonexcludable

when it is costly or impossible to exclude someone from using the good, and thus hard to charge for it

nonrivalrous

even when one person uses the good, others can also use it

public good

good that is nonexcludable and nonrivalrous, and thus is difficult for market producers to sell to individual consumers