Copied from PublicGoodsProblems

... the perenial light-house example. All ships passing the lighthouse will see the light. So although someone who funds a light-house to protect their ships, gains from it; they don't get a competitive advantage over anyone else. So the incentive is much reduced.

DanielDavies is very good on lighthouses, here (here) (Scroll to the bottom of the page)

See also :