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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 known as a subset of public goods that possess one of the two key factors that public goods carry.

 

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. It means that:

  • They aren’t excluded from anyone using them (non-excludable)
  • They aren’t going to be used up or unsuitable for use when used by someone else (non-rivalrous)

 

What it Means to Be Non-Rivalrous

Club goods is a term applied, typically, to things and places that are fairly huge in size, such as a public park. However, any thing or place, no matter how vast, possess some form of limited capacity. Club goods deal with this issue by being defined as goods that are non-rivalrous (meaning their use doesn’t prevent them from being used up), but only to a point.

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

Club goods are quite often underutilized, due to their excludability. While they are widely considered non-rivalrous, 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

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

 

2. Club goods

They are goods that are non-rivalrous, but excludable and 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 one or more make them unavailable to others (you can’t use a fish more than once); however, they are generally not exclusive.

 

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 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!