The free rider problem occurs when individuals benefit from goods or resources consumed without contributing towards the cost of producing them. This situation often arises with common resources and public goods, both of which are non-excludable (non-paying consumers cannot be excluded from consuming the good or resource). Examples include public parks, public broadcasting, and national defense.
Why It Happens?
The problem stems from individuals believing their contributions are too small to affect the quantity or quality of the good being produced and that the payment of others will adequately cover the costs of production. This perspective leads to some consumers benefiting without compensating the producer of the good, creating a shortage in production that is not socially optimal.
Consequences of Free Riding
Solutions to the Free Rider Problem
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