Excludability---the property of a good whereby a person can be prevented from using it
Rivalry in consumption---the property of a good whereby a person's use diminishes other people's use
Private goods---goods that are both excludable and rival in consumption
Public goods---goods that are neither excludable nor rival in consumption
Common resources--- goood that are rival in consumption but not excludable
Club goods--- goods that are excludable but not rival in consumption
In thinking about the various goods in the economy, it is useful to group then according to two characteristics :
- Is the good excludable? That is ,can people be prevented from using the good?
- Is the good rivalry in consumption ? That is , does one person's use of the good reduce another person's ability to use it ?
Using these two characteristics , the list divides goods into four categories:
- Private goods are both excludable and rival in consumption. Consider an ice-cream cone . For example , an ice-cream cone is rivalry in consumption because if one person rats an ice-cream cone , another person cannot eat the same cone . Most goods in the economy are private goods like ice-cream cones : You don't get one unless you pay for it , and once you have it , you are the only person who benefits . When we analyzed supply. And demand in Chapters 4 - 6 and the efficiency of markets in Chapters 7 - 9 , we implicitly assumed that goods were both excludable and rival in consumption .
Public goods are neighter excludable nor rivalry in consumption. That is , people cannot be prevented from using a public good , and one person's use of a public good does not reduce another preson's ability to use it . For example , a tornado siren in a small town is a public good . Once the siren sounds , it is impossible to prevent any single person from hearing it (so it is not excludable) . Moreover , when one person gets the benefit of the warning , she does not reduce the benefit to anyone else (so it is not rival in consumption).
Common resources are rivalry in consumption but not excludable . For example , fish in the ocean are rivalry in consumption: When one person catches fish , there are fewer fish for the next person to catch . Yet these fish are not an excludable good because , given the vast size of an ocean , it's difficult to stop fishermen from taking fish out of it .
Club goods are excludable but not rival in consumption . For instance , consider fire protection in a small town . It's easy to exclude someone form using this good : The fire department can just let her house burn down . Yet fire protection is not rival in consumption : Once a town has paid for the fire department , the additional cost of protecting one more house is small . (We discuss club goods again in Chapter 15 , where we see that they are one type of a natural monopoly .)
