Free rider problem
Categories: Game theory | Market failure
In the analyses of economics and political science, free riders are actors who take more than their fair share of the benefits or do not shoulder their fair share of the costs of their use of a resource, involvement in a project, etc.. The free rider problem is the question of how to prevent free riding from taking place, or at least limit its effects.
Because the notion of "fairness" is highly subjective, free riding is usually only considered to be an economic "problem" when it leads to the non-production or under-production of a public good, and thus to Pareto inefficiency, or when it leads to the excessive use of a common property resource.
The usual example of a free rider problem is National Defense: no person can be excluded from being defended by a nation's military and thus free riders may develop who refuse or avoid paying for being defended, but are still as well guarded as everyone else in the nation. Therefore, it is usual for the government to avoid relying on volunteer donations, using taxes and/or conscription instead.
The problem is particularly important and troublesome when considering goods or resources to which access cannot be excluded. For more information, see public good and tragedy of the commons.
See also
References
- Richard Cornes and Todd Sandler, The Theory of Externalities, Public Goods and Club Goods 2nd ed. (1996)
External links