[Script Info]
Title: 
[Events]
Format: Layer, Start, End, Style, Name, MarginL, MarginR, MarginV, Effect, Text
Dialogue: 0,0:00:00.00,0:00:03.00,Default,,0000,0000,0000,,♪ [music] ♪
Dialogue: 0,0:00:13.21,0:00:14.93,Default,,0000,0000,0000,,- [Prof. Alex Tabarrok]\NIn the previous video
Dialogue: 0,0:00:14.93,0:00:16.37,Default,,0000,0000,0000,,we covered public goods,
Dialogue: 0,0:00:16.37,0:00:18.44,Default,,0000,0000,0000,,which are nonexcludable,\Nand nonrival.
Dialogue: 0,0:00:18.77,0:00:20.84,Default,,0000,0000,0000,,Let's now turn to club goods.
Dialogue: 0,0:00:21.48,0:00:23.97,Default,,0000,0000,0000,,Club goods are also nonrival,
Dialogue: 0,0:00:23.97,0:00:27.24,Default,,0000,0000,0000,,but unlike public goods,\Nthey are excludable.
Dialogue: 0,0:00:27.24,0:00:29.25,Default,,0000,0000,0000,,Let's take Wi-Fi as an example.
Dialogue: 0,0:00:29.55,0:00:33.34,Default,,0000,0000,0000,,You might need a password\Nto connect to a Wi-Fi network.
Dialogue: 0,0:00:33.75,0:00:35.50,Default,,0000,0000,0000,,That's what makes it excludable.
Dialogue: 0,0:00:36.15,0:00:39.59,Default,,0000,0000,0000,,However, assuming that\Nthere isn't much congestion,
Dialogue: 0,0:00:39.59,0:00:42.93,Default,,0000,0000,0000,,there's no cost to allowing\Nmore people onto the network.
Dialogue: 0,0:00:43.52,0:00:46.96,Default,,0000,0000,0000,,Up to a point, therefore,\NWi-Fi is non-rival.
Dialogue: 0,0:00:47.92,0:00:51.30,Default,,0000,0000,0000,,HBO -- that's another example\Nof a club good.
Dialogue: 0,0:00:51.54,0:00:54.93,Default,,0000,0000,0000,,It's excludable --\Nyou have to pay $15.99 a month
Dialogue: 0,0:00:54.93,0:00:58.39,Default,,0000,0000,0000,,or something like that\Nto get into the HBO club.
Dialogue: 0,0:00:58.96,0:01:02.21,Default,,0000,0000,0000,,But more viewers don't add to costs,
Dialogue: 0,0:01:02.21,0:01:04.91,Default,,0000,0000,0000,,so HBO is also nonrival.
Dialogue: 0,0:01:05.36,0:01:07.75,Default,,0000,0000,0000,,Markets can provide club goods,
Dialogue: 0,0:01:07.75,0:01:09.98,Default,,0000,0000,0000,,but at the price\Nof some inefficiency.
Dialogue: 0,0:01:10.36,0:01:13.11,Default,,0000,0000,0000,,Imagine for example\Nthat someone is willing to pay
Dialogue: 0,0:01:13.11,0:01:16.17,Default,,0000,0000,0000,,$8 per month\Nto watch Game of Thrones.
Dialogue: 0,0:01:17.94,0:01:20.29,Default,,0000,0000,0000,,The marginal cost of HBO
Dialogue: 0,0:01:20.29,0:01:23.07,Default,,0000,0000,0000,,providing that viewer\Nwith Game of Thrones --
Dialogue: 0,0:01:23.07,0:01:24.79,Default,,0000,0000,0000,,it's basically zero.
Dialogue: 0,0:01:24.79,0:01:27.79,Default,,0000,0000,0000,,The potential viewer\Nis willing to pay $8,
Dialogue: 0,0:01:27.79,0:01:29.62,Default,,0000,0000,0000,,which is more than the cost.
Dialogue: 0,0:01:30.06,0:01:32.30,Default,,0000,0000,0000,,Yet they don't get to watch,
Dialogue: 0,0:01:32.30,0:01:35.39,Default,,0000,0000,0000,,because the price\Nof HBO is even higher --
Dialogue: 0,0:01:35.39,0:01:37.21,Default,,0000,0000,0000,,$15.99 per month.
Dialogue: 0,0:01:37.61,0:01:41.26,Default,,0000,0000,0000,,This is unlike competitive markets\Nthat we covered earlier,
Dialogue: 0,0:01:41.26,0:01:43.33,Default,,0000,0000,0000,,where we saw trades get made
Dialogue: 0,0:01:43.33,0:01:46.35,Default,,0000,0000,0000,,so long as the value\Nis greater than the cost.
Dialogue: 0,0:01:47.70,0:01:52.86,Default,,0000,0000,0000,,For club goods, there's some\Nloss of efficiency in exclusion.
Dialogue: 0,0:01:53.12,0:01:55.96,Default,,0000,0000,0000,,In excluding this\Nparticular viewer, for example,
Dialogue: 0,0:01:55.96,0:01:59.37,Default,,0000,0000,0000,,since the benefit to the viewer\Nis greater than the cost,
Dialogue: 0,0:01:59.37,0:02:01.74,Default,,0000,0000,0000,,yet that trade is not made.
Dialogue: 0,0:02:02.40,0:02:06.69,Default,,0000,0000,0000,,Now, the fact that HBO\Ncharters for entry to it's club --
Dialogue: 0,0:02:06.69,0:02:08.91,Default,,0000,0000,0000,,that means that HBO, however,
Dialogue: 0,0:02:08.91,0:02:13.17,Default,,0000,0000,0000,,has an incentive to figure out\Nwhat viewers really want to watch.
Dialogue: 0,0:02:13.56,0:02:15.40,Default,,0000,0000,0000,,That's an important benefit.
Dialogue: 0,0:02:15.40,0:02:19.51,Default,,0000,0000,0000,,The diversity, creativity\Nand responsiveness of the market
Dialogue: 0,0:02:19.51,0:02:22.57,Default,,0000,0000,0000,,probably outweighs\Nthe loss of efficiency
Dialogue: 0,0:02:22.57,0:02:24.95,Default,,0000,0000,0000,,in having the market\Nproduce club goods.
Dialogue: 0,0:02:25.95,0:02:28.05,Default,,0000,0000,0000,,As we covered in the last video,
Dialogue: 0,0:02:28.05,0:02:30.63,Default,,0000,0000,0000,,public goods\Ntend to be under-provided,
Dialogue: 0,0:02:30.63,0:02:34.10,Default,,0000,0000,0000,,because they cannot\Nbe adequately charged for.
Dialogue: 0,0:02:34.70,0:02:36.62,Default,,0000,0000,0000,,One solution to this problem
Dialogue: 0,0:02:36.62,0:02:40.76,Default,,0000,0000,0000,,is figuring out how to turn\Na public good into a club good.
Dialogue: 0,0:02:41.24,0:02:44.45,Default,,0000,0000,0000,,And entrepreneurs\Nhave created excludable goods,
Dialogue: 0,0:02:44.45,0:02:47.33,Default,,0000,0000,0000,,like cable tv and satellite radio,
Dialogue: 0,0:02:47.33,0:02:50.12,Default,,0000,0000,0000,,that are alternatives\Nto the public goods
Dialogue: 0,0:02:50.12,0:02:52.95,Default,,0000,0000,0000,,of broadcast television and radio.
Dialogue: 0,0:02:53.66,0:02:55.77,Default,,0000,0000,0000,,Other entrepreneurs\Nhave even discovered ways
Dialogue: 0,0:02:55.77,0:02:58.99,Default,,0000,0000,0000,,to profit from providing public goods
Dialogue: 0,0:02:58.99,0:03:01.81,Default,,0000,0000,0000,,even without relying on exclusion.
Dialogue: 0,0:03:01.81,0:03:03.31,Default,,0000,0000,0000,,How's that possible?
Dialogue: 0,0:03:04.26,0:03:07.86,Default,,0000,0000,0000,,Radio and broadcast television --\Nthey're public goods.
Dialogue: 0,0:03:08.23,0:03:10.84,Default,,0000,0000,0000,,They're nonexcludable, and nonrival,
Dialogue: 0,0:03:10.84,0:03:14.73,Default,,0000,0000,0000,,and yet they are\Nprovided privately by markets.
Dialogue: 0,0:03:15.28,0:03:21.88,Default,,0000,0000,0000,,In this case, the market overcame\Nthe challenge through advertising.
Dialogue: 0,0:03:22.41,0:03:25.79,Default,,0000,0000,0000,,Advertising -- it really works\Nquite well for TV and radio.
Dialogue: 0,0:03:26.07,0:03:29.49,Default,,0000,0000,0000,,The marginal costs of providing\Nsomeone a radio or TV signal --
Dialogue: 0,0:03:29.49,0:03:30.68,Default,,0000,0000,0000,,it's zero.
Dialogue: 0,0:03:30.68,0:03:32.94,Default,,0000,0000,0000,,And the price -- it's zero as well.
Dialogue: 0,0:03:33.21,0:03:36.73,Default,,0000,0000,0000,,Price equals marginal cost --\Nthat's efficient.
Dialogue: 0,0:03:37.23,0:03:39.38,Default,,0000,0000,0000,,Now, you do have to watch the ads,
Dialogue: 0,0:03:39.38,0:03:42.94,Default,,0000,0000,0000,,and that's profitable\Nbecause they're selling the ad time.
Dialogue: 0,0:03:44.05,0:03:45.60,Default,,0000,0000,0000,,Here's another familiar example,
Dialogue: 0,0:03:45.60,0:03:47.71,Default,,0000,0000,0000,,maybe you've heard of it -- Google.
Dialogue: 0,0:03:48.21,0:03:51.97,Default,,0000,0000,0000,,The search technology\Nand the database are nonrival.
Dialogue: 0,0:03:52.63,0:03:56.36,Default,,0000,0000,0000,,Google could exclude\Nby adding a subscription cost.
Dialogue: 0,0:03:56.53,0:03:58.73,Default,,0000,0000,0000,,But it chooses not to,
Dialogue: 0,0:03:58.73,0:04:02.19,Default,,0000,0000,0000,,since it makes more money\Nby giving the product away for free
Dialogue: 0,0:04:02.19,0:04:03.93,Default,,0000,0000,0000,,and selling advertising.
Dialogue: 0,0:04:04.66,0:04:06.41,Default,,0000,0000,0000,,Now let's go back to Wi-Fi.
Dialogue: 0,0:04:06.60,0:04:08.17,Default,,0000,0000,0000,,It's a very interesting case,
Dialogue: 0,0:04:08.17,0:04:12.66,Default,,0000,0000,0000,,because we can see Wi-Fi provided\Nin almost all possible ways.
Dialogue: 0,0:04:12.66,0:04:15.63,Default,,0000,0000,0000,,It's sold by private firms,\Nlike Sprint,
Dialogue: 0,0:04:15.63,0:04:18.07,Default,,0000,0000,0000,,who exclude non-payers.
Dialogue: 0,0:04:18.53,0:04:20.97,Default,,0000,0000,0000,,It's offered free\Nto attract customers
Dialogue: 0,0:04:20.97,0:04:22.56,Default,,0000,0000,0000,,at places like Starbucks.
Dialogue: 0,0:04:23.20,0:04:25.64,Default,,0000,0000,0000,,It's free in other places\Nif you watch ads.
Dialogue: 0,0:04:26.23,0:04:29.44,Default,,0000,0000,0000,,And it's even provided for free\Nby some local governments.
Dialogue: 0,0:04:30.82,0:04:33.96,Default,,0000,0000,0000,,So we see all types\Nof provision methods for Wi-Fi,
Dialogue: 0,0:04:34.57,0:04:36.78,Default,,0000,0000,0000,,and it's not clear\Nwhich is the best,
Dialogue: 0,0:04:36.78,0:04:39.44,Default,,0000,0000,0000,,or even if there is a best method.
Dialogue: 0,0:04:40.19,0:04:42.41,Default,,0000,0000,0000,,Okay, that's it for club goods.
Dialogue: 0,0:04:43.04,0:04:45.57,Default,,0000,0000,0000,,Next we'll be looking at\Nnonexcludable,
Dialogue: 0,0:04:45.57,0:04:47.43,Default,,0000,0000,0000,,but rival resources --
Dialogue: 0,0:04:47.43,0:04:49.11,Default,,0000,0000,0000,,the common resources.
Dialogue: 0,0:04:50.81,0:04:52.25,Default,,0000,0000,0000,,- [Narrator]\NIf you want to test yourself,
Dialogue: 0,0:04:52.25,0:04:54.23,Default,,0000,0000,0000,,click "Practice Questions."
Dialogue: 0,0:04:54.80,0:04:57.92,Default,,0000,0000,0000,,Or, if you're ready to move on,\Njust click "Next Video."
Dialogue: 0,0:04:58.40,0:05:00.71,Default,,0000,0000,0000,,♪ [music] ♪