Public goods is a term that refers to one type of market failure. They represent a specific type of goods. Key features of public goods are:
- Non-rivalry of the consumption - consumption of the goods by one individual does not reduce availability of the goods for consumption by others
- Non-excludability of the consumption - in term of costs, it is not reasonably possible to exclude any customer from the consumption
Sometimes a third feature can be added:
- Zero marginal costs on providing goods to additional consumers - marginal costs of providing public goods to additional consumers are zero
Public goods are one of the characteristic products of the public sector, respectively public administration. However, not all public services are public goods - it can be a publicly provided private goods.
Use of public goods in practice: Resolution on public and private goods is used in decision making, whether a given type of goods can effectively provide the private sector, or whether it is more preferable provider the public sector.
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