Question

In what sense is an online rating site (i.e. Yelp) a public good? Will online ratings be over or underprovided relative to what would be socially optimal?

Answer 1

Answer) Online rating site such as Yelp are public good as they are non rival in consumption and non excludable in nature of providing service. Since the good and service is public good in nature, there is a possibility of free rider problem. Whereby the individual would take the service for Grant and won't make any contribution whenever the service is being availed.

As the result the service would be under provided because the abled and well off section of the society would also avail the service without paying. To arrive at the socially optimal level a differential targeting can be done. In which some rating are provided free of cost under the ambit of public good and the rest could be put under private good.