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Contents

1
2
3
Public Goods

Collectively consume

1. One person’s consumption does
not prevent another person

It is impossible to exclu...
Public Good

non- rivalrous
A type of good that
may only be
possessed or
consumed by a
single user.

non – excludable
thei...
Public Goods

fresh air, systems
Knowledge, lighthouses
national defense, flood control
sewer systems, public parks
radio ...
Contents

1
2
3
Free Riders Problem

In economics, the free rider problem
refers to a situation where some
individuals in a population eit...
1

2

3

4
Contents

1
2
3
Solution

Regulatory

Solution
Of
Free
rider problem

Market
Solution
Regulatory solutions to free riding take the form
of union security practices

The (pre-entry) closed shop, the ...
Free Rider Problem
Market solution :









Assurance contracts
Coasian solution
Government provision
Subsidies a...
Solution( assurance contract)

An assurance contract is a
contract in which participants
make a binding pledge to
contribu...
Solution( coasian )
The coasian solution, named for the
economist Roalnd Coase, proposes a
mechanism by which potential be...
Solution (Public Provision)
If voluntary provision of public goods will not
work, then the obvious solution is making thei...
Solution
Subsidies and joint products
A government may subsidize production of a public good in the
private sector.

Pri...
Solution
Merging free riders
Another method of overcoming the free rider problem is to
simply eliminate the profit incent...
BIBLIOGRAPHY
http://www.investopedia.com/search/default.aspx?q=nonexcludable
http://en.wikipedia.org/wiki/Public_good#Th...
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Free riders problem in prectice

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Free riders problem in prectice

  1. 1. “ Add your company slogan ” Prof., Dr. LOGO
  2. 2. Contents 1 2 3
  3. 3. Public Goods Collectively consume 1. One person’s consumption does not prevent another person It is impossible to exclude one to derive benefit Public goods
  4. 4. Public Good non- rivalrous A type of good that may only be possessed or consumed by a single user. non – excludable their benefits are available to anyone, regardless of whether they have contributed to the cost of providing them.. .
  5. 5. Public Goods fresh air, systems Knowledge, lighthouses national defense, flood control sewer systems, public parks radio broadcasts,
  6. 6. Contents 1 2 3
  7. 7. Free Riders Problem In economics, the free rider problem refers to a situation where some individuals in a population either consume more than their fair share of a common resource, or pay less than their fair share of the cost of a common resource.
  8. 8. 1 2 3 4
  9. 9. Contents 1 2 3
  10. 10. Solution Regulatory Solution Of Free rider problem Market
  11. 11. Solution Regulatory solutions to free riding take the form of union security practices The (pre-entry) closed shop, the hiring hall and the preferential shop The union shop (post-entry closed shop) and maintenance of membership agreements The agency shop (compulsory bargaining fees)
  12. 12. Free Rider Problem Market solution :        Assurance contracts Coasian solution Government provision Subsidies and joint products Privileged group Merging free riders Introducing an exclusion mechanism (club goods)  Social norms
  13. 13. Solution( assurance contract) An assurance contract is a contract in which participants make a binding pledge to contribute to building a public good, contingent on a quorum of a predetermined size being reached.
  14. 14. Solution( coasian ) The coasian solution, named for the economist Roalnd Coase, proposes a mechanism by which potential beneficiaries of a public good band together and pool their resources based on their willingness to pay to create the public good
  15. 15. Solution (Public Provision) If voluntary provision of public goods will not work, then the obvious solution is making their provision involuntary. This saves each of us from our own tendency to be a free rider, while also assuring us that no one else will be allowed to free ride.
  16. 16. Solution Subsidies and joint products A government may subsidize production of a public good in the private sector. Privileged group The study of collective action shows that public goods are still produced when one individual benefits more from the public good than it costs him to produce it; examples include benefits from individual use, intrinsic motivation to produce, and business models based on selling complement goods. A group that contains such individuals is called a Privileged group.
  17. 17. Solution Merging free riders Another method of overcoming the free rider problem is to simply eliminate the profit incentive for free riding by buying out all the potential free riders. Introducing an exclusion mechanism (club goods) to introduce exclusion mechanisms which turn public goods into Club Goods. One well-known example is copy right and patent laws. Social norms If enough people do not think like free-riders, the private and voluntary provision of public goods may be successful.
  18. 18. BIBLIOGRAPHY http://www.investopedia.com/search/default.aspx?q=nonexcludable http://en.wikipedia.org/wiki/Public_good#The_free_rider_problem http://www.slideshare.net/aquinaseconomics/public-goods24530101?from_search=1 http://newunionism.wordpress.com/2012/09/30/conor_cradden/ http://www.who.int/trade/glossary/story041/en/index.html https://www.google.ge/search?q=benefits+of+a+public+good&ne wwindow=1&rlz=1C1SNNT_enGE485GE485&es_sm=122&source =lnms&tbm=isch&sa=X&ei=umRUUqvHJomQ7AbWlICwCA&ved= 0CAkQ_AUoAQ
  19. 19. Any Question ? ? ? ? ? ?? ??
  20. 20. “ Add your company slogan ” WE LOVE PUBLIC FINANCE LOGO

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