Common-Property Goods

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. Common-property goods are in the bottom left cell of the matrix, with rival consumption and the inability to exclude nonpayers.

Common-property goods are owned by everyone, meaning property rights are not controlled by anyone in particular. Even though consumption by one imposes an opportunity cost on others, one person cannot prevent another from consumption. These goods cannot be efficiently exchanged through markets and governments are often called upon to control their use. The best examples of common-property goods come from the assorted natural resources available to the planet, including the atmosphere, oceans, lakes, rivers, and wilderness areas. Because individuals and businesses in the private sector cannot effectively exclude nonpayers from consumption, governments step in to regulate and oversee the use of common-property goods.

Common-property goods need government intervention. Rival consumption means marginal cost is greater than zero. Efficiency is served if users then pay a price equal to marginal cost. Unfortunately the inability to exclude nonpayers means that a price cannot be charged. Then end result is that common-property goods are overused or overconsumed. In the case of many natural resources, such as the atmosphere, oceans, and wildlife, they can be overconsumed to the point of complete exhaustion. Governments need to regulate their use. In some cases they can do so effectively and efficiently. In other cases they can not.

Some Common Examples

Rival Consumption

Suppose, for example, that Edgar Millbottom wants to do a little marlin fishing off the coast of Florida. To the extent that Edgar is successful and catches a magnificent marlin, then others, like Alicia Hyfield, are unable to receive the benefits of catching this fish, which imposes an opportunity cost.

Whether the good is private or common-property, rival consumption means that efficiency is best achieved when those who benefit from consumption pay a price equal to the opportunity cost. Markets accomplish this for private goods, but not for common-property goods.

Nonpayer Nonexcludability

Again, let's turn to Edgar Millbottom's marlin fishing off the coast of Florida. Edgar, Alicia, and anyone else can gain access to marlin fishing off the coast of Florida. Restricting access is virtually impossible.

With nonpayer nonexcludability, common-property goods cannot be exchanged through markets. Ownership and control cannot be transferred only to those who pay.

Enter Governments

Three Other Goods

• Private: Private goods are characterized by rival consumption and the ability to exclude nonpayers. Private goods can be easily, effectively, and efficiently exchanged through markets.


• 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.


• 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.