Private Good

A product that must be purchased in order to be consumed, and whose consumption by one individual prevents another individual from consuming it. Economists refer to private goods as "rivalrous" and "excludable". If there is competition between individuals to obtain the good and if consuming the good prevents someone else from consuming it, a good is considered a private good.

A private good is the opposite of a public good. Examples of private goods include food, airplane rides and cell phones.

Private goods are less likely to experience the free rider problem because a private good has to be purchased - it is not readily available for free. A company's goal in producing a private good is to make a profit. Without the incentive created by revenue, a company is unlikely to want to produce the good.

Investment dictionary. . 2012.

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