Various types of goods include excludability and rivalry in consumption. In case property rights are not defined properly four types of goods, congestible goods, club goods and public goods. Excludability can be referred to as the degree to which consumption of various goods or services is limited for paying customers. For example broadcast television exhibits low rate of excludability or in non-excludable because people can use it without paying any fees for it. Besides this, the cable television exhibits high excludability or is excludable because people have to pay for consuming the service. As per the definition, rival goods or services is something whose consumption by an individual presents simultaneous consumption by numerous other customers. Excludability of the services can be considered as a situation where it is possible for preventing people or customers that have not paid for it from having access to it.
An example could be considered, suppose an individual had bought a car and the same car cannot be made available to other customers or anyone else. This is because of the lack of supply of the car. This means that there exists a rivalry in the consumption of the service. Now if this example is replaced with street lights, an additional pedestrian on a properly lit street do not add to the cost of the providing the street lighting. Hence there is non-rivalry in the consumption of the service. Excludability can be defined as a situation when someone is excluded from using a particular good or a service. An example of it includes an individual who have been excluded from using the cinema for watching a movie unless the individual buys a ticket. Goods such as pollution free environment as well as street lights are not excludable which means people cannot be excluded from using these services. Rivalry is a certain characteristic of a good which leads to the degradation of the quality or the overall amount of good for one use which results to the overall degradation of the entire quality of the goods besides the quantity of the good for one use in case it has already been used by a different individual. Such as free Wi-Fi can be considered to be a rivalrous good, this is because when the number of users tend to increase, the quality of internet received by users tend to decrease. similarly, streetlights are considered as non-rivalrous goods because if a single person is reading a certain book beneath the street light would not decrease the benefit of any other person present there.
Various goods like fruits are subject to consumption rivalry. In case an individual eats a fruit, it would no more be available for anyone else. But other goods would not be subject to consumption of rivalry. Most of the people might tune in to the same radio signals at the same time and in this case, the quality of the signals would not be degrading. In the same way, it is very easy for a certain individual to exclude customers who have not paid for apples. But it is impossible to exclude free riders on numerous public radio signals. People can classify numerous goods with the help of drawing a two by two matrix on the basis of high or low rivalry on one hand and high or low excludability on other as follows
Excludability as well as rivalry can be defined as characteristics that could be used for the purpose of distinguishing among the nature of goods. Private goods are excludable as well as rivalarous in nature, besides this public gods are considered as non-excludable as well as non-rivalrous. When a certain individual can be stops from consuming a certain good, then the good is known as excludable. Such as the house of an individual, his car, or his food at a certain restaurant and many more. In other words, goods which are under the private ownership are called to be excludable. In cases where consumption of a certain good by a particular person reduces the overall utility of another person, then the goods are known as rivalrous in nature. For example in case an individual tries to share the ice cream with another person, a congested life a certain office building and many more. Examples of excludable goods include a public road and a highway, air and many more. Some examples of the non rivalrous goods could be watching movie in a mall, an empty parking lot, air and many more.
How do these characteristics determine whether a good is a private good?
Rivalry as well as excludability are related to each other. In case there is no rivalry in the consumption, there would be no reason for excluding except raising the funds. Availability of funding do not eliminate the rivalry. Suppose one apple cannot be shared with a huge number of people or an unlimited amount of people. Hence goods are subjected to consumption rivalry would never become public goods. Apart from these, how various goods that are non- rival in nature are funded could determine whether a good is a public good or a simple low congestion good. An example of this can be considered, a search engine would practically have an unlimited capacity for searching, and the traffic would become a public good in case it is indirectly supported through the advertisement revenues. But the similar search engine will become a low congestion good in case it is fee based. it would be feasible in a technical manner for excluding various users in any other cases, but there is no point for excluding in case including various users would reduce the overall amount of ad-supported revenues.
Indirect funding of numerous public goods as well as direct fees or the low congestion goods are numerous means for the purpose of avoiding free ridership where numerous users would enjoy the service without even paying. When a certain good is not considered as a subject to the consumption rivalry, indirect funding will be generated with most amount of benefit because even users with low amount of marginal benefit would be attracted to the zero marginal cost. In this case, the content of the goods would be affected by the way by which service is funded. For example, over the air network television as well as public television are both public goods, but there is a particular tendency for the TV networks for appealing to lowest common denominator for maximizing advertise revenues. In a converse manner, in case there is a rivalry in the consumption, there would be present every reason for excluding. Both the private goods as well as common goods would be subject to the consumption rivalry. But in this case it is much more difficult to clearly defining and hence enforce the overall property rights for numerous common goods. Hence the tragedy of the commons.
High enforcements cost could transform private goods into the facto common goods as well as low congestion goods into de facto public goods. An example of this is that the unfenced front lawn of the house belonging to a certain person which is considered as a private good would become the public toilet which is a common good for the dogs of the neighbours. And a private label digital music which is a low congestion good had become a freebie or a public good for the community of file sharing.
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