Mary lives next door to Mike. Since she works the night shift, she suggests to Mike the idea of constructing a light post between their two houses. He agrees and tells her to get the light post constructed and to send him the bill for his share. Later, however, he refuses to pay his share of the cost. Mike now has the benefits of the light at no cost, and Mary can do nothing about it.This situation can also occur in the marketplace, where no one can be excluded from using a public good such as electricity and water. What actions can be or are being taken to deal with such situations? Give examples.
What are public goods? Why must the government provide them or force the private sector to provide them? What is the free-rider problem?