What Is a Rival Good?
A rival good is a type of product or service that can only be possessed or consumed by a single user. When a good is rival in consumption, it may be subject to strong demand and fierce competition—factors that tend to drive up prices.
These items can be durable, meaning they may only be used one at a time, or nondurable, meaning they are destroyed after consumption, allowing only one user to enjoy it.
- A rival good is a type of good that may only be possessed or consumed by a single user.
- Rival goods can be durable, meaning they may only be used one at a time, or nondurable, meaning they perish after consumption.
- When a good is rival in consumption, the resulting competition can increase its value to the individuals who seek them.
- Limited availability, coupled with demand, gives businesses that supply rival goods leeway to set prices higher.
- Common examples of rival goods include food, clothing, electronic goods, cars, plane tickets, and houses.
Understanding Rival Goods
Certain goods, such as a bottle of beer or designer t-shirt, are subject to consumption rivalry. If someone drinks the bottle or buys the t-shirt, it is no longer available for anybody else to consume.
Because these types of goods can only be used or occupied by one person, competition is created for their consumption. Consumers, therefore, become rivals in an attempt to obtain them.
How much competition there is, of course, depends on availability. If there are lots of the same bottles of beer on supermarket shelves, it’s easy to procure another one, provided that thousands of other people aren’t eager to buy them at that particular moment.
Conversely, if the designer t-shirt is of a limited edition, one-of-a-kind nature, it’s possible that people engage in a price war and are willing to pay over the odds to get their hands on it. Competition for this type of rival good is also compounded by the availability of apparel in sizes that meet each consumer’s needs. Manufacturers might only produce limited quantities of products for certain sizes. As a result, consumers who require hard-to-find sizes must compete with each other to procure the items they need.
The COVID-19 pandemic led to a shortage in toilet paper, causing panic among households and some businesses to capitalize by hiking up prices for the consumer staple.
Common examples of rival goods include food, clothing, electronic goods, cars, plane tickets, and houses.
Durable vs. Nondurable
Sometimes, rival goods can be reused by somebody else at a later stage. For example, durable goods such as a skateboard might be sold after the current owner is finished with it.
A non-durable good, such as a cup of coffee or apple, does not fall into this category because it perishes after consumption. Only one consumer can drink the coffee or eat the apple. After it is gone, there will be nothing left to consume.
Rival Goods vs. Non-Rival Goods
Goods are either classified as rival or non-rival. A rival good is something that can only be possessed or consumed by a single user. A good that can be consumed or possessed by multiple users, on the other hand, is said to be a non-rival good.
The internet and radio stations are examples of goods that are nonrival. Many people can access them at the same time, and they can be consumed over and over again without impacting their quality or running the risk that supply will be depleted.
Rival Goods vs. Non-Excludable Goods
Non-excludable goods are public goods that cannot exclude a certain individual or group of individuals from using them. For this reason, it is nearly impossible to restrict access to the consumption of non-excludable goods. A public road is an example of a non-excludable good. Almost everyone has access to a public road, even if they are just walking on it (rather than driving a motorized vehicle).
The opposite of a non-excludable good is an excludable good, which is a good that some people are restricted from using. Excludable goods are private goods, while non-excludable goods are public goods. A rival good is a type of excludable good because it can only be possessed or consumed by a single user.
Procuring a rival good can impact their overall supply, potentially leading to price increases and a future lack of availability.
The competitive nature of rival goods can increase their value to the individuals who seek them. This is especially true for the travel, hospitality, and entertainment industries. Goods that are rival in consumption can include seats on an airplane or for a Broadway performance. Likewise, they can include a reserved seat at a restaurant.
When demand is high for rival goods, businesses can exert more pricing power. Limited availability, coupled with demand, gives businesses leeway to set prices higher.
Demand for rival goods can drive concentrated retail sales during holiday periods as consumers race to procure items as gifts before they sell out, or while certain discounts are available. This type of shopping behavior has been used to retailers’ advantage, in particular during Black Friday sales events. For example, if a rival good is in high demand but has limited availability, retailers might advertise plans to offer it for sale specifically on Black Friday.
Rival Good FAQs
What Are Club Goods, Public Goods, Private Goods, and Common Goods?
In the field of economics, goods are defined based on excludability and rivalrousness in their consumption.
Club goods are excludable but non-rival. Cable television is an example of a club good because it can be consumed or possessed by multiple users at the same time but it is excludable—some people are restricted from watching cable television.
Public goods are non-excludable and non-rival. Examples of public goods are public parks and the air we breathe. Access to parks and air is not restricted and they can be consumed or possessed by multiple users.
Private goods are excludable and rival. Clothing is an example of a private good because some people are restricted from objects of clothing and an item of clothing can only be possessed or consumed by a single user at one time.
Common goods are non-excludable and rival. Examples of common goods are coal and timber because they can only be possessed or consumed by a single user at one time but access is not restricted.
What Is the Free Rider Problem?
The free-rider problem is a phenomenon of the conventional free-market system. It occurs when some members of a community fail to contribute their fair share to the costs of a shared resource. The free-rider problem creates a burden on a shared resource as a result of its use or overuse.
Why Can Markets Only Provide Private Goods Efficiently?
Markets can only provide private goods efficiently because of the free-rider problem. All goods that are non-excludable suffer from the free-rider problem because some individuals are unwilling to pay for their own consumption. Instead, they will take a “free ride” on anyone who does pay for the goods. When some people fail to contribute to the production of goods, it makes the resource economically infeasible to produce.
View more information: https://www.investopedia.com/terms/r/rival_good.asp