This caselet is meant to introduce the participants/students to the concepts of Public Goods and Private Goods, Externalities and most importantly the managerial and policy implications of these economic theoretical constructs. When two MBA first semester students, Deepa Sharma and Divya Lokhande, go for an outing at Nandi Hills, they witness the operation of a public property (National Highway (NH7) built on PPP model) and misuse of another public asset (Tipu Sultan's Summer Palace and Fort). This caselet also enables the participants to be sensitized to a related concept of Deadweight Social Loss, i.e., a public good misused. Would an awareness and appreciation of these concepts help to induce the intended behavior amongst citizens? Most importantly, how does an understanding of the concepts of public goods, private goods and externalities help a manager in effective decision-making?

1. TOUR TO NANDI HILLS: EXCITED WITH EXTERNALITIES
This caselet is meant to introduce the participants/students to the concepts of Public Goods and Private
Goods, Externalities and most importantly the managerial and policy implications of these economic theoretical
constructs. When two MBA first semester students, Deepa Sharma and Divya Lokhande, go for an outing at
Nandi Hills, they witness the operation of a public property (National Highway (NH7) built on PPP model)
and misuse of another public asset (Tipu Sultan’s Summer Palace and Fort). This caselet also enables the
participants to be sensitized to a related concept of Deadweight Social Loss, i.e., a public good misused. Would
an awareness and appreciation of these concepts help to induce the intended behavior amongst citizens? Most
importantly, how does an understanding of the concepts of public goods, private goods and externalities help
a manager in effective decision-making?
Pedagogical Objectives
• To understand the differences between public goods and private goods and discuss the economic costs and
benefits of the same including the Rivalry and Excludable nature of public and private goods
• To understand the concept of Externalities – positive and negative – and examine how Deadweight Social
Loss occurs, when a public good is misused and its impact on the society
• To discuss and debate on the relationship between public goods, private goods, externalities and executive
decision-making
Case Positioning and Setting
The caselet can be used in either MBA or Executive MBA or Executive Development Programs, for either of
the following modules/topics:
• In ‘Managerial Economics’ Course: Public Goods and Externalities – To understand the relevance and
importance of the concepts of Public Goods, Private Goods, Positive and Negative Externalities, Free-
rider Problem and Deadweight Social Loss
• Corporate Responsibility Module: To sensitize the participants to the concepts of Positive and Negative
Externalities and the resultant Dead Weight Loss
ABSTRACT
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