Wireless, high-speed Internet is provided for free in the...

Wireless, high-speed Internet is provided for free in the airport of the city of Communityville. a. At first, only a few people use the service. What type of a good is this and why? b. Eventually, as more people find out about the service and start using it, the speed of the connection begins to fall. Now what type of a good is the wireless Internet service? c. What problem might result and why? What is one possible way to correct this problem?

Wireless, high-speed Internet is provided for free in the airport of the city of Communityville.
a. At first, only a few people use the service. What type of a good is this and why?
b. Eventually, as more people find out about the service and start using it, the speed of the connection
begins to fall. Now what type of a good is the wireless Internet service?
c. What problem might result and why? What is one possible way to correct this problem?

Key Concepts

Corrective Mechanisms (Pricing and Regulation)

Addressing the issues of overuse and congestion can involve introducing a pricing mechanism or implementing regulation to limit access. By charging users for wireless service or controlling the number of simultaneous users, it is possible to internalize the congestion externality, thereby encouraging more efficient usage and maintaining service quality.

Free Rider Problem

The free rider problem refers to situations where individuals benefit from a resource without contributing to its cost, often leading to overuse and depletion of the resource. The free access to the airport wireless Internet can attract numerous users who do not bear any cost for their usage, potentially exacerbating congestion and reducing service performance for everyone.

Rivalry in Consumption

Rivalry refers to a situation where one person’s consumption of a good diminishes the ability of others to consume the same good. In the context of the wireless Internet service, when few people use it the quality is high and consumption appears non-rivalrous, but as usage increases, each additional user reduces the available bandwidth, illustrating how a good can shift from being non-rivalrous to rivalrous.

Public Goods vs. Common Resources

This concept highlights the difference between goods that are non?excludable and non?rivalrous (public goods) and those that, while non?excludable, are rivalrous due to finite resources (common resources). Initially, the wireless Internet may appear to function as a public good because few users share the resource without affecting its quality, but as more users log on, the limited bandwidth becomes a rivalrous resource, making it a common resource.

Congestion Externality

Congestion externality occurs when the use of a shared resource by one individual negatively impacts the quality of service experienced by other users. As the number of people accessing the free wireless Internet increases, each new user contributes to congestion, leading to a decline in connection speed and overall service quality.

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