Week 2 Notes

Week 2 Notes - Week 2 Goods o Object whose consumption...

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Week 2 Goods o Object whose consumption increases ones utility/happiness Owning a car is better than not owning a car. o Characteristics Rival vs. non-rival Does the consumption of the good prevent others from consuming it? Excludable vs. non Can someone be prevented from consuming the good without paying for it? Cooperation and collective action o Cooperation: pooling of resources and coordination of effort by a group to achieve common goals If you lack a common goal, then cooperation is difficult. o People often share goals but rarely cooperate. o Cooperation is costly If everyone benefits from the provision of the good (e.g. clean environment) why should I bear the burden and pay the costs (e.g. take the bus) Free Riding o Environment will be cleaner regardless of my behavior If everyone else took the bus then I don’t need to and I still get to experience a clean environment
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But if one person thinks like that then everyone else will think like that too. If no one else (or a few) took the bus o Therefore we all have an incentive to free ride. Enjoy the benefits of a good while letting other pay the costs of providing it. o Example: Students have a common interest in a low tuition, low interest loans, more financial aid. Why isn’t there more involvement with orgs. That lobby government? Because you will pay less tuition regardless of you involvement with a student lobbying group There is another incentive to free ride. o So how do we get people to cooperate? Coercion, selective incentives, benefits from participation. Benefits from participation- sometimes just getting involved in a group effort provides incentive to join. o
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Week 2 Notes - Week 2 Goods o Object whose consumption...

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