Club goods
Also called: Toll goods · Topic: Government Budget, Fiscal Policy and FRBM · NCERT: Beyond NCERT
Meaning
Club goods, also called toll goods, are goods that are excludable but non-rival up to a point of crowding. Excludable means people who do not pay can be kept out, for example with a fee or a gate. Non-rival means one more user does not reduce anyone else's benefit, as long as the facility is not crowded. Once it becomes crowded (the congestion point), each extra user lowers the quality for others. Because non-payers can be shut out, private firms can often supply club goods and charge a fee for them.
Example
A toll road lets in only cars that pay the toll, so it is excludable. On a quiet day, one more car does not slow anyone down, so it is non-rival. At rush hour, extra cars cause traffic jams, so it stops being non-rival. Cable TV and private parks work the same way.
Don't confuse with
- Public goods: these are non-excludable as well as non-rival, so no one can be charged for them. Club goods can be charged for.
- Common-pool resources: these are rival but non-excludable, like fish in an open sea. Club goods are the opposite pair: excludable but non-rival.
Related concepts
- Allocation function
- Redistribution function
- Stabilisation function
- Public goods
- Private goods
- Non-rivalry
- Non-excludability
- Free-rider problem
- Merit goods
- Demerit goods