Case Studies 1: Attributes of the Goods

Abstract

In this chapter some properties of common goods will be examined with respect to effects they have ceteris paribus on the strategic constellation. Only some basic and important characteristics will be taken into account. First, I would like to draw attention to a fundamental feature: the relation of the individual costs of contributions to the individual benefits derived from the good. Depending on the cost-benefit configuration, a good that exhibits the typical properties of a common good might very well pose no collective action problem at all. This will be demonstrated using credit ratings as an example. Second, the classic demand-side properties will be examined. Do different combinations of the rivalry and the excludability dimension result in different strategic constellations? Here, an exclusive and a nonexclusive nonrival good will be compared, as well as a rival and a nonrival exclusive good. The examples used are credit ratings, environmental pollution, and systemic risk in global capital markets. Third, the supply-side properties of common goods will be examined. I vary three extreme cases of aggregation technologies of the contributions to a good: summation technology, weakest-link technology, and best-shot technology. Global warming, biodiversity, and the siting of locally unwanted facilities are used as illustrations.