Saturday, March 05, 2005

Anti-rival and anti-excludable

I've been hearing for some time about rivalrous vs. non-rivalrous goods, and excludable vs. non-excludable ones. This is because physical property is excludable and rivalrous, while intellectual property -- something that's very important in my day job -- is non-excludable and non-rival. (Some definitions subsume "exhaustable" in "rival". The term "rival" is synonymous with "rivalrous", as are "exclusive" and "excludable". For a summary of terms see here.)

In simple terms, the more people share a rivalrous good, the less there is for anyone; when they share a non-rivalrous good, everyone gets the same amount, and the amount doesn't decrease with more users. Apples and seats on a plane are rivalrous; an idea, radio broadcasts and the common cold are non-rivalrous.

Goods are exclusive if producers can prevent people from consuming them if they haven't paid. I can prevent someone from using an exclusive good, but I can't prevent someone from passing on a non-exclusive good like an idea. It pretty easy to make tangible goods exclusive; I can lock up the apples. It's harder with intangibles, as the struggles over managing access to digital music have illustrated.

Some goods are both non-rival and non-excludable, like national defense, and non-DRM protected digital music. Public goods are non-rival and non-excludable. The rival/non-rival and excludable/non-excludable concepts can be shown as a 2x2 matrix:

RivalTangible private goods (eg airline seats)Commons (eg unlicensed spectrum)
Non-rivalIntangible private goods (eg patented inventions)Public goods (eg national defence)

These definitions, however, don't take into effect the network effects that have become so prevalent on the web. Social networks like amazon reviews and tags are not just non-rivalrous, as one would expect from knowledge; the more one uses them, the more value is created.

These goods are "anti-rivalrous". Their use increases the amount available for consumption by others.

One can play the same game with exclusiveness. An "anti-exclusive good" might be one where the my giving it to you actively encourages you to pass it along to others. Viruses are one example; another is peer-to-peer software which someone cannot use without becoming a server node for others.

Expanding the table above to a 3x3 gives:
Non-rival~~(eg viruses)
Anti-rival(eg member-limited social networks)(eg communal site tagging)(eg P2P supernodes)

Note that I haven't given names to the cells - that's left as an exercise to the economists...

No comments: