Definition
- Free rider problem
- The free rider problem is when people have an incentive to let others pay for a good and then use it without paying, because they cannot be excluded.
Example
Can you think of an example of free rider problem?
A town asks residents to chip in for a firework display. Each hopes the others will pay and plans to watch anyway, so donations fall short and the display may never happen.
Test yourself
Can you name the two tests of a public good, and the two ideas built on them?