1. Verbal Bellringer
1
If I consume good #1, can
you consume it also?
If I consume good #2, can
you consume it also?
2

2. Private Goods
• Excludable
• Firms can exclude people who don’t pay
• Rivaled consumption
• A person’s consumption affects others’
consumption

3. Public Goods
• Goods that are both non-excludable and
non-rivaled in consumption

4. Free Rider Problem
• Free Rider – a person who does not pay
for, but benefits from a public good
How does society pay
for public goods?
Think back to our game
Taxes
User fees

5. Other types of goods
• Common goods – rivaled consumption,
non-excludable

6. Other types of goods
• Club goods – non-rivaled consumption,
excludable

7. Private Goods
For example:
food
Club goods
EX: Golf Course,
movie theatre
Common Goods
EX: Open ocean fishing
Public goods
EX: National Defense

8. Excludable? Rivaled Consp.?

9. Excludable? Rivaled Consp.?

10. Excludable? Rivaled Consp.?

11. On the back of your Public goods handout
• Consider this public problem:
1. If South Tucson has a higher crime rate than
other parts of the city. Why is this so?
• Neighborhoods in South Central Los Angeles
have started hiring private security guards to
patrol their streets and take pictures of crimes
and gang activity. For every $10 they spend it
reduces crime by $5 on average.
2. Would this be a good idea for South Tucson?
3. How might residents us “game theory” to decide
whether or not to pay for the security?
4. How might the free rider problem prevent this?