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Club Goods

A subset of public goods that possess one of the two key factors of public goods

What are Club Goods?

In economics, club goods – also sometimes referred to as scarce or artificially scarce goods – are a subset of public goods that possess one of the two key factors that public goods carry – namely, being non-rivalrous.

 

Club Goods

 

Characteristics of Club Goods

Club goods are non-rivalrous, so they’re not in danger of being used up or defiled by one or more person’s use, up until the point where continued use causes the use of the goods to become congested. They are, however, excludable, which means that people can be denied access to them or use of them.

On the other hand, public goods are both non-excludable and non-rivalrous. This means that:

  • Everyone is equally free to use them (non-excludable)
  • They aren’t going to be used up or unsuitable for use by future users when someone uses them (non-rivalrous)

 

What it Means to Be Non-Rivalrous

Club goods is a term applied, typically, to things and places that are fairly large in size, such as a public park. However, anything or place, no matter how vast, is characterized by some form of limited capacity. Club goods are goods that are non-rivalrous (meaning their use doesn’t cause them to be used up), but only to a point.

A private park or beach may be filled to capacity, meaning its use by some would make it temporarily unusable by others because of congestion. Once the congestion clears, however, the goods can then continue to be used by others without being entirely used up.

Club goods are quite often underutilized, due to their excludable nature. However, when overuse arises, they are then inaccessible or unusable until the congestion of use clears.

 

The Four Types of Goods

There are four general categories or types of goods recognized in the field of economics:

 

1. Public goods

These are goods that are non-excludable and non-rivalrous. They include things such as the air, emergency services, national defense, and broadcast television.

 

2. Club goods

These are goods that are non-rivalrous, but excludable. They include things such as satellite TV, private parks, and movie theatres.

 

3. Common goods

Goods, such as timber, coal, or fish stock, that are non-excludable and rivalrous, meaning their use by some makes them then unavailable or less available for use by others (you can’t eat a fish more than once).

 

4. Private goods

Goods that are both excludable and rivalrous, meaning the number of people who can use them is limited and, once used, they are less plentiful or unusable for others. They include goods such as parking spaces, food, cars, and clothing.

 

Additional Resources

CFI is the official provider of the global Financial Modeling & Valuation Analyst (FMVA)™ certification program, designed to help anyone become a world-class financial analyst. To keep advancing your career, the additional CFI resources below will be useful:

  • Common-Pool Resources
  • Giffen Good
  • Law of Demand
  • Veblen Goods

Financial Analyst Certification

Become a certified Financial Modeling and Valuation Analyst (FMVA)® by completing CFI’s online financial modeling classes!