Google
Monday 
May 20, 2024 

AmosWEB means Economics with a Touch of Whimsy!

AmosWEBWEB*pediaGLOSS*aramaECON*worldCLASS*portalQUIZ*tasticPED GuideXtra CrediteTutorA*PLS
HORIZONTAL MERGER: The consolidation under a single ownership of two separately-owned businesses in the same industry. An example of a horizontal merger would be two soft drink companies merging to form a single firm. A horizontal merger should be contrasted with vertical merger--two firms in different stages of the production of one good, such that the output of one business is the input of the other; and conglomerate merger--two firms in totally, completely separate industries.

Visit the GLOSS*arama


PRIVATE GOODS:

Goods characterized by rival consumption and the ability to exclude nonpayers. Private goods are one of four types of goods differentiated by consumption rivalry and nonpayer excludability. The other three goods are public (nonrival consumption and nonpayers cannot be excluded), common-property (rival consumption and nonpayers cannot be excluded), and near-public (nonrival consumption and nonpayers can be excluded). Rival consumption and the ease of excluding of nonpayers means private goods can be efficiently exchanged through markets.
Private goods are one of four types of goods differentiated by consumption rivalry (rival or nonrival) and nonpayer excludability (excludable and nonexcludable). In particular, these are goods characterized by rival consumption, meaning the consumption by one person imposes an opportunity cost on others, and the ability to exclude nonpayers from gaining benefits from consumption.

Private Goods
PbFn22
The exhibit to the right illustrates the four alternative types of goods -- private, public, common-property, and near-public -- based on the mix of consumption rivalry and nonpayer excludability. Private goods are in the top right cell of the matrix, with rival consumption and the ability to exclude nonpayers.

Private goods have well-defined property rights that can be transferred to others, but only if others pay to acquire ownership. These goods can be easily, effectively, and efficiently exchanged through markets, that is, through the actions of producers and consumers of the private sector. Examples of private goods range far and wide, from candy bars to cars to comic books to corduroy sport coat. In fact, most, not all but most, goods traded through markets are private goods.

Private goods are ideally suited for efficient market exchanges. Nonpayers can be excluded from consumption and they should be. Efficiency is achieved if those who consume a private good pay a price equal to the marginal cost of rival consumption imposed on others.

Examples Galore

Most goods consumed by most people most of the time fall in the category of private goods. From a Deluxe Club Sandwich eaten by Edgar Millbottom to the cozy bed provided to weary travellers at the Shady Valley Bed and Breakfast Inn. From the OmniFast 9000 athlete shoes purchased by Duncan Thurly at the MegaMart Discount Warehouse Supercenter to the gasoline that corporate junior executive Jonathan McJohnson buys to fuel his OmniSport All Terrain 4x4 SUV.

Most consumer expenditures on food, clothing, shelter, and other commonly purchased goods are for private goods, private goods that are exchanged through markets.

Rival Consumption

Because private goods are rival in consumption, the consumption by one person prevents simultaneous consumption by others, and thus prevents others from receiving the benefits of consumption. This means consuming a private good imposes an opportunity cost on others who are not able to consume.

Suppose, for example, that Edgar Millbottom is pondering the consumption of a Deluxe Club Sandwich produced by Manny Mustard's House of Sandwich. When Edgar consumes this sandwich, he and he alone receives the satisfaction and benefits provided. More over, when he consumes the sandwich, no one else, such as his friend Alicia Hyfield, can consume it. Alicia is unable to enjoy this particular sandwich. Alicia, in other words, foregoes the satisfaction that she could have received from the sandwich, and thus incurs an opportunity cost.

With rival consumption, efficiency is best achieved when the person benefitting from the good pays a price equal to the opportunity cost. Markets are very good at doing just that.

Nonpayer Excludability

Private goods are also characterized by the ability to exclude nonpayers from gaining ownership and control, and thus from receiving the benefits of consumption. In other words, private goods have well-defined property rights. The owner of a private good can set and enforce the terms by which the ownership of the good is transferred to another.

Again, let's turn to Edgar Millbottom's desire to consume one of Manny Mustard's Deluxe Club Sandwiches. This sandwich has well-defined property rights. Manny, the producer, has ownership and control of the sandwich. He has the ability to transfer that ownership and control on his terms. The terms Manny has set is a $5 price. If Edgar wants to gain ownership of the sandwich, presumably to eat, then he must pay Manny the $5 price. No payment means no sandwich.

Markets to the Rescue

With nonpayer excludability, private goods can be exchanged through markets. Markets are ideally suited for exchanging private goods.

The combination of rival consumption and nonpayer excludability means that private goods are both efficiently provided through markets and ideally suited for market exchanges. With rival consumption markets work to achieve efficiency. Fortunately, nonpayer excludability makes markets the ideal mechanism for making exchanges.

It's almost as if society created markets for the expressed purpose of exchanging private goods. As a matter of facts, society DID create markets for the expressed purpose of exchanging private goods. And markets do a relatively good job most of the time of exchanging private goods.

Three Other Goods

Private goods are only one of four types of goods characterized by consumption rivalry and nonpayer excludability. The three are public goods, common-property goods, and near-public goods.
  • Public: Public goods are characterized by nonrival consumption and the inability to exclude nonpayers. Public goods cannot be exchanged through markets. The only efficient way to provide public goods is through governments.

  • Common-Property: Common-property goods are characterized by rival consumption and the inability to exclude nonpayers. These goods can not be efficiently exchanged through markets and governments are often called upon to control or regulate their use.

  • Near-Public: Near-public goods are characterized by nonrival consumption and the ability to exclude nonpayers. These goods are often exchanged through markets, but are more efficiently provided by governments.

<= PRINCIPLE OF MINIMUM DIFFERENCESPRIVATE PROPERTY =>


Recommended Citation:

PRIVATE GOODS, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2024. [Accessed: May 20, 2024].


Check Out These Related Terms...

     | public finance | consumption rivalry | nonpayer excludability | public goods | common-property goods | near-public goods | free-rider problem | public goods: demand | public goods: efficiency |


Or For A Little Background...

     | good | production | efficiency | consumption | market demand | market | market efficiency | government sector | public sector | property rights | private sector |


And For Further Study...

     | market failures | taxation principles | tax proportionality | tax effects | tax equity | involuntary exchange | benefit principle | ability-to-pay principle |


Search Again?

Back to the WEB*pedia


APLS

GRAY SKITTERY
[What's This?]

Today, you are likely to spend a great deal of time wandering around the shopping mall seeking to buy either a rechargeable flashlight or storage boxes for your computer software CDs. Be on the lookout for high interest rates.
Your Complete Scope

This isn't me! What am I?

A communal society, a prime component of Karl Marx's communist philosophy, was advocated by the Greek philosophy Plato.
"Many people think that if they were only in some other place, or had some other job, they would be happy. Well, that is doubtful. So get as much happiness out of what you are doing as you can and don't put off being happy until some future date. "

-- Dale Carnegie

TR
Total Revenue
A PEDestrian's Guide
Xtra Credit
Tell us what you think about AmosWEB. Like what you see? Have suggestions for improvements? Let us know. Click the User Feedback link.

User Feedback



| AmosWEB | WEB*pedia | GLOSS*arama | ECON*world | CLASS*portal | QUIZ*tastic | PED Guide | Xtra Credit | eTutor | A*PLS |
| About Us | Terms of Use | Privacy Statement |

Thanks for visiting AmosWEB
Copyright ©2000-2024 AmosWEB*LLC
Send comments or questions to: WebMaster