Question

Why does the definition of a pure public good imply that its benefits are not subject to congestion?

Answer 1

Public Goods are goods with benefits that cannot be withheld from those who do not pay and are shared by large groups of consumers

• Two Properties:

• Are nonrival in consumption, meaning that a given quantity of a public good can be enjoyed by more than one consumer without decreasing the amounts enjoyed by rival consumers  Zero marginal cost of accomodating an additonal consumer.

• Are nonexclusive, meaning it is too costly to exclude those who refuse to pay from enjoying the benefits

Goods for which crowding or congestion reduces the benefits to existing consumers when more consumers are accommodated.

• Marginal cost of accommodating an additional consumer is not zero after the point of congestion is reached.

• E.g., a user of a congested road decreases the benefits to existing users by slowing traffic, increasing accident risk

The marginal cost of allowing additional users to consume the congestible public good falls to zero after the good is made available to any one user. but then rises above zero after users are accommodated per hour.