And this deterrence is an indivisible nonexcludable good
to neighbors and visitors.
The advantage of externality theory is that it can apply to any nonexcludable good, whether rival or nonrival, (36) including the global environmental and other common pool resources.
It might be interesting to have a theory for the special subset of nonexcludable goods that happen to be nonrival also, but surely there are too few such goods to justify giving it a major place in our analysis, unless we are looking for a theory of lighthouses and their international parallels.
Cornes and Sandler [1984; 1985] and others consider a contribution game where the market price of the nonexcludable good
is fixed at the zero level.
The extent to which these norms are observed in a collectively consumed, nonexcludable good
The first type reflects the fact that there are some highly nonexcludable goods whose development a patent system will fail to incentivize because the private returns appropriable using patents remain lower than the private costs of creation or validation of the good.
For highly nonexcludable goods, the standard "optimizing" response to the transaction cost problem--namely, to increase the strength of patent protection or the ability of patentees to extract a greater share of the surplus from transactions--will be ineffectual in remedying the underlying skew between social value and private appropriability.
The greater the asymmetry in profitability from excludable goods as opposed to nonexcludable goods, the more an innovation system that includes property rights as a major component can be expected to tilt toward excludable solutions over time.
Other oft-cited examples of nonexcludable goods
include fire and police protection, fireworks displays, and national defense.
Such techniques include creating the fencing technology needed to exclude free riders (think of the walls around movie screens and theater stages), tying nonexcludable goods
to excludable goods, and such legal devices as conditioned contracts that go into legal effect only when a sufficient number of persons have agreed to pay for a particular project.
This aspect of the argument is crucial because the joint products model hinges on the inseparability of the excludable and nonexcludable goods
A profit cannot be gained by the private sector if it produces nonexcludable goods
. Consequently, nonmarket interventions are required to ensure that certain public goods are produced.