Private goods, club goods and common resources

The two tests. Economists sort goods by two questions:

• Rivalry: does one person's use reduce the amount left for others? If it does, the good is rival.
• Excludability: can a person who does not pay be kept from using it? If doing so is extremely hard or too costly, the good is non-excludable. (Exclusion may be technically possible, but so expensive that it is not practical.)

Private goods are both rival and excludable. Example (our own): a plate of chole bhature at a Delhi stall. Once one customer eats it, no one else can (rival), and the seller hands it over only on payment (excludable). Most things sold in shops fall here, and markets supply them well because sellers can charge every user.

Club goods are non-rival but excludable. Example (our own): a video streaming subscription. One more subscriber watching a film does not take the film away from anyone else (non-rival), but the company can shut out anyone who has not paid (excludable). An uncrowded toll bridge is similar. A club good stays non-rival only while it is not crowded; crowding makes use rival, so the classes are not rigid.

Common resources are rival but non-excludable. Example (our own): the sand on an open river bed. Each truckload removed leaves less for other users (rival), and where the bank is open to all, no one can easily be stopped from taking it (non-excludable). Because no one can be kept out, such resources tend to be overused, which is the tragedy of the commons.

Summary.