Classroom Companion: Business

Rival
Excludable
Examples
Private goods
Yes
Yes
Cars, food, mobile phones
Common-pool resources
Yes
No
Fish, forests, wild berries
Club goods
No
Yes
Cinemas, cable TV, private parks
Public goods
No
No
Air, national defense, knowledge
6.3 · Classification of Digital Goods

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flix and World of Warcraft is excludable—a paid subscription plan is required for 
using both these services.
If a digital good is both non-rival and non-excludable, it is classified as a public 
good. Public goods occupy a special place in economic theory. They are often 
prone to market failure resulting in governmental regulation or other market inter-
actions to make the market function properly. One of the reasons for market fail-
ure is the free rider problem. Public goods can be accessed by anyone without paying 
for it. There are, therefore, no incentives for private actors to provide these goods; 
likewise, there are no incentives for users to pay for access or usage to maintain and 
uphold the good. One example is Wikipedia offering a free encyclopedia on the 
Internet. There are few or no incentives for private actors to financially support or 
invest in Wikipedia. Wikipedia relies primarily on two sources of income for sus-
taining its operations: financial donations from benefactors and voluntary work by 
authors who write and update articles.
A common-pool resource is prone to the tragedy of the commons, in which 
common resources get overused and depleted. Even though individuals act in 
their own self-interest, it is the collective behavior of all individuals that may lead 
to overuse or depletion. Examples of the tragedy of the commons are overfishing 
in the seas and air pollution. The tragedy of the commons also has impacts on 
Rival
Non-rival
Excludable
Non-excludable