Course

Club Goods

Instructor: Alex Tabarrok, George Mason University

Club Goods : Goods that are excludable and nonrival. Though non-payers can be prevented from benefiting from the good (excludable), the cost of providing the good

Club Goods: Goods that are excludable and nonrival. Though non-payers can be prevented from benefiting from the good (excludable), the cost of providing the good for one additional consumer is zero (nonrival). This is from the video “Club Goods” in the Principles of Microeconomics course.

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Transcript

In the previous video we covered public goods, which are nonexcludable, and nonrival. Let's now turn to club goods.


Club goods are also nonrival, but unlike public goods, they are excludable. Let's take Wi-Fi as an example. You might need a password to connect to a Wi-Fi network. That's what makes it excludable. However, assuming that there isn't much congestion, there's no cost to allowing more people onto the network. Up to a point, therefore, Wi-Fi is non-rival. HBO, that's another example of a club good. It's excludable, you have to pay $15.99 a month or something like that to get into the HBO club. But more viewers don't add to costs, so HBO is also nonrival. Markets can provide club goods, but at the price of some inefficiency.


Imagine for example that someone is will to pay $8 per month to watch Game of Thrones. The marginal cost of HBO providing that viewer with Game of Thrones, it's basically zero. The potential viewer is willing to pay $8, which is more than the cost. Yet they don't get to watch, because the price of HBO is even higher, $15.99 per month. This is unlike competitive markets that we covered earlier, where we saw trades get made so long as the value is greater than the cost. For club goods, there's some loss of efficiency in exclusion. In excluding this particular viewer for example. Since the benefit to the viewer is greater than the cost, yet that trade is not made.

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