Public goods a good that is nonrival and nonexclusionary in consumption a Nonrival: A good which when consumed by one person does not preclude other people from also consuming the good Example: Radio signals, national defense Nonexclusionary: No one is excluded from consuming the good once it is provided Example: Clean air Free rider> problem a Individuals have little incentive to buy a public good because of their nonrival nonexclusionary nature Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Public Goods • A good that is nonrival and nonexclusionary in consumption.  Nonrival: A good which when consumed by one person does not preclude other people from also consuming the good. • Example: Radio signals, national defense  Nonexclusionary: No one is excluded from consuming the good once it is provided. • Example: Clean air • “Free Rider” Problem  Individuals have little incentive to buy a public good because of their nonrival & nonexclusionary nature