Free Rider Problem for Public Goods?
What is the Free Rider Problem for Public Goods?
Written by J. Mance Gordon
Updated at April 23rd, 2024
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What is the Free Rider Problem for Public Goods?
Private companies find it difficult to produce public goods. If a good or service is nonexcludable, like national defense, so that it is impossible or very costly to exclude people from using this good or service, then how can a firm charge people for it?
When individuals make decisions about buying a public good, a free rider problem can arise, in which people have an incentive to let others pay for the public good and then to “free ride” on the purchases of others. We can express the free rider problem in terms of the prisoner’s dilemma game,
When individuals make decisions about buying a public good, a free rider problem can arise, in which people have an incentive to let others pay for the public good and then, since once there is a provided public good it is available to all, to “free ride” on the purchases of others.
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