Public goods 2013

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  • Public goods 2013

    1. 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. 2. Private Goods • Excludable • Firms can exclude people who don’t pay • Rivaled consumption • A person’s consumption affects others’ consumption
    3. 3. Public Goods • Goods that are both non-excludable and non-rivaled in consumption
    4. 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. 5. Other types of goods • Common goods – rivaled consumption, non-excludable
    6. 6. Other types of goods • Club goods – non-rivaled consumption, excludable
    7. 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. 8. Excludable? Rivaled Consp.?
    9. 9. Excludable? Rivaled Consp.?
    10. 10. Excludable? Rivaled Consp.?
    11. 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?

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