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CHAPTER4,PublicGoods,Copyright2010bytheMcGraw-HillCompanies,Inc.Allrightsreserved.,McGraw-Hill/Irwin,CharacteristicsofGoods,Excludablevs.NonexcludableExcludablepreventinganyonefromconsumingthegoodisrelativelyeasyNonexcludablepreventinganyonefromconsumingthegoodiseitherveryexpensiveorimpossibleRivalvs.NonrivalRivalonceprovided,theadditionalresourcecostofanotherpersonconsumingthegoodispositiveNonrivalonceprovided,theadditionalresourcecostofanotherpersonconsumingthegoodiszero,0,TypesofGoods,PRIVATEGOODS,PUBLICGOODS,COMMONRESOURCES,NATURALMONOPOLY,NoteworthyAspectsofPublicGoods,Eventhougheveryoneconsumesthesamequantityofthegood,itneednotbevaluedequallybyallClassificationasapublicgoodisnotabsolute;itdependsonmarketconditionsandthestateoftechnologyimpurepublicgoodAcommoditycansatisfyonepartofthedefinitionofapublicgoodbutnottheotherSomethingsthatarenotconventionallythoughtofascommoditieshavepublicgoodcharacteristicsPrivategoodsarenotalwaysprovidedonlybytheprivatesectorpubliclyprovidedprivategoodsPublicprovisionofagooddoesnotnecessarilymeanthatitisalsoproducedbythepublicsector,SomeOtherPublicGoods,BasicresearchProgramstofightpovertyUncongestednon-tollroadsFireworksdisplay,EfficientProvisionofPrivateGoods,0,DfA,DfE,DfA+E,0,Sf,$,QuantityofPizza,4-7,ParetoEfficiencyPrivateGoodsCase,MRSfa=Pf/PaSetPa=$1MRSfa=PfDfAshowsMRSfaforAdamDfEshowsMRSfaforEveSfshowsMRTfaNecessaryconditionforParetoefficiency:MRSfaAdam=MRSfaEve=MRTfa,EfficientProvisionofPublicGoods,0,0,DrA,DrE,DrA+E,Sr,QuantityofFireworks,$,4-10,ParetoEfficiencyPublicGoodsCase,MRSfa=Pf/PaSetPa=$1MRSfa=PfDfAshowsMRSfaforAdamDfEshowsMRSfaforEveSfshowsMRTfaNecessaryconditionforParetoefficiency:MRSfaAdam+MRSfaEve=MRTfa,ProblemsAchievingEfficiency,TheFree-RiderProblemSolutionstothefree-riderproblemPerfectpricediscriminationPolicyPerspective:GlobalPositioningSystemDopeoplefreeride?,0,LaboratoryExperimentsandFree-Riding,HowatypicalexperimentworksTypicalresultsPeoplecontributeabout50%ofresourcestoprovisionofpublicgoodContributionsfallthemoreoftenthegameisrepeatedCooperationfosteredbypriorcommunicationContributionratesdeclinewhenopportunitycostofgivinggoesup“Warm-glow”giving,ThePrivatizationDebate,PrivatizationtakingservicessuppliedbygovernmentandturningthemovertotheprivatesectorPublicvPrivateProvision:Whatistherightmix?RelativewageandmaterialscostsAdministrativecostsDiversityoftastes,DistributionalIssues,Commodityegalitarianismnotionthatsomecommoditiesoughttobemadeavailabletoeveryone,PublicversusPrivateProduction,EfficiencyofprivateproductionProblemsincomparingcostdifferencesIncompletecontractsCompetitiontosupplygoodorserviceReputationbuildingPolicyPerspective:Shouldairportsecuritybeproducedpubliclyorprivately?MarketEnvironment,PreferenceRevelationMechanisms,TEve=MRTra(

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