A related characteristic of goods is nonpayer excludability, which is the ability to exclude nonpayers from consuming a good. These two characteristics give rise to four types of goods -- private (rival consumption and nonpayers can be excluded), 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).

Consumption rivalry determines whether or not efficiency is achieved at a positive, nonzero, price -- something accomplished with market exchanges. The opportunity cost caused by rival consumption means efficiency is achieved if the price is positive. With no opportunity cost from nonrival consumption efficiency is achieved if the price is zero.

Rival or Not

• Rival: A good is rival in consumption if the consumption by one person prevents the simultaneous consumption by another, thus imposing an opportunity cost on others. A candy bar provides an example of rival consumption. If Roland Nottingham eats a candy bar, then Victor Thurgood cannot eat, consume, or enjoy this same candy bar. Roland's consumption prevents Victor's consumption.


• Nonrival: A good is nonrival in consumption if the consumption by one person does not prevent the simultaneous consumption by another, thus does not impose an opportunity cost on others. A fireworks display provides an example of nonrival consumption. If Roland Nottingham watches a dazzling fireworks display lighting up the Shady Valley night sky from his front porch, doing so does not preclude Victor Thurgood from enjoying the same fireworks display from his own backyard. Roland's consumption does not prevent Victor's consumption.

Nonpayer Excludability

Four Goods

Let's take a look at each one.

• Private: Private goods are characterized by rival consumption and the ability to exclude nonpayers. Such goods have well-defined property rights that can be transferred to others, but only if others pay to acquire ownership.


• Public: Public goods are characterized by nonrival consumption and the inability to exclude nonpayers. These goods are, in essence, owned by everyone, which is actually okay because everyone can benefit from simultaneously consuming the goods.


• Common-Property: Common-property goods are characterized by rival consumption and the inability to exclude nonpayers. These goods are owned by everyone, meaning they are not owned by anyone in particular. Even though consumption by one imposes an opportunity cost on others, one person cannot prevent another from consumption.


• Near-Public: Near-public goods are characterized by nonrival consumption and the ability to exclude nonpayers. While nonpayers can be excluded from consumption, nonrival consumption means there is no efficiency reason to exclude nonpayers.

The Price of Efficiency

With rival consumption, consumption by one person imposes an opportunity cost on others who are unable to consume the good. Efficiency is achieved if the price of the good is positive and equal to the opportunity cost. If the price is less than the opportunity cost (for example, zero), then the value of the good produced is less than the value of goods not produced. Society is better of by producing less this good and more of other goods. This is achieved with a higher price that according to the law of demand reduces the quantity demanded.