17.6 Rivalry and Exclusion

Until now, we’ve focused on private goods, which have the properties of rivalry and exclusion. A good is rival if only one person can consume the good. If Jane eats an orange, that orange is gone. Exclusion means that the owner of a good can prevent others from consuming it. If Jane owns an orange, she can easily prevent others from consuming that orange by, for example, locking it in her home. Thus, an orange is subject to rivalry and exclusion.

If a good lacks rivalry, everyone can consume the same good, such as clean air or national defense. If a market charges a positive price for that good, market failure occurs because the marginal cost of providing the good to one more person is zero.

If the good lacks exclusion, ...

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