Free rider problem

The free rider problem occurs when those who benefit from resources, goods, or services do not pay for them, which results in an under-provision of those goods or services. The free rider problem is the question of how to limit free riding and its negative effects in these situations. The free rider problem may occur when property rights are not clearly defined and imposed.

The free rider problem is common among public goods. These are goods that have two characteristics: non-excludability-non-paying consumers cannot be prevented from using it when you consume the good, it does not reduce the amount available to others. The potential for free riding exists when people are asked to voluntarily pay for a public good.

Although the term “free rider” was first used in economic theory of public goods, similar concepts have been applied to other contexts, including collective bargaining, antitrust law, psychology and political science.

In the problem of free-riders there are the different figures:

• Free riders: the ones who benefit from resources, goods, or services do not pay for them
• Forced riders: the ones who are forced to pay for goods that they do not want.

Examples of free riders: *Community organization: some individuals in a team or community may reduce their contributions or performance if they believe that one or more other members of the group may free ride

• Labor union: free riding occurs if an employee pays no union dues or agency shop fees, but benefits from union representation. One free rides to profit from a stock trade without actually using any of his or her own capital.
• Defense spending. No one person can be excluded from being defended by a state’s military forces, and thus free riders may refuse or avoid paying for being defended, even though they are still as well guarded as those who contribute to the state’s efforts.
• Internet users who practice Ad blocking or ad filtering (block advertising). They are not contributing for a service that they are taking profit.

Examples of forced riders:

• Pacifists are required to pay for national defense.
• Environmentalists may be required to pay for public works projects, such as dams, which they feel destroy natural habitats in ways they do not condone.
• Taxi drivers are forced to pay taxes in order to keep public transport services.

It is a complex problem in which a lot of goods, sometimes opposites can be considered, as market opportunities, security, trust… Some of them, as an emergent properties, are very difficult to split benefits or decouple different benefits from their causes which makes more difficult to treat that problem quantitatively in a general framework problem-solving.

See also

Game Theory, Tragedy of the commons

Papers

• Pasour, Jr., E. C. The Free Rider as a Basis for Government Intervention. Libertarian Studies.
• Ruël, Gwenny Ch.; Bastiaans, Nienke and Nauta, Aukje. Free-riding and team performance in project education
• Hardin, Russell. The Free Rider Problem The Stanford Encyclopedia of Philosophy (May 21, 2003)
• Rothbard, M. N. (1981). The Myth of Neutral Taxation. Cato J., 1, 519.