The free rider problem is a situation in which someone or some group enjoys the benefits of something without contributing to its production.
In other words, it arises when people take advantage of public resources and services without paying for them – as no one can be excluded from these goods/services regardless if they have contributed or not.
A good example would be parks: although those who contribute may help maintain it, anyone else can still use it just like them, even if they didn’t put anything towards upkeep costs.
This issue often presents challenges that organizations and individuals face while creating shared public goods. The free rider problem is generally addressed through widening the amount of people who contribute, or charging pay-per-service whenever possible.
Definition of the Free Rider Problem
The free rider problem is an issue faced when individuals or groups take advantage of public goods without contributing to their production.
According to Solo (2014),
“…a free rider problem exists when an investment has personal costs but common benefits, leading to underinvestment by individuals” (p. 195).
This problem presents a challenge because while providing these resources can require substantial effort, it’s hard to prevent non-contributors from benefitting too.
Pasour (1981) adds that:
“…the free rider is most often discussed in the case of public goods, where the effect is alleged to be too little production” (p. 455).
Freeriders and Public Goods
A public good is a type of good or service that is non-excludable and non-rivalrous.
Non-excludable means that once a public good is provided, it is difficult to prevent non-contributors from using it. Non-rivalrous imposes that one person’s use of the good or service does not diminish its availability to others (Kaul, 2003).
Once they’re provided, anyone can partake in them at no cost – this leads to some taking advantage without paying anything into the system.
If everyone were willing to contribute towards producing such a good, then there would be reasonable costs associated with providing it, and everybody could benefit from using it fairly.
However, if someone opts out entirely, this results in underfunding and reducing effectiveness, which causes considerable strain on those who do pay up (Pasour, 1981).
Simply, the free rider problem makes supplying certain types of products/services tricky due to being unable to exclude people who don’t produce them from enjoying their benefits.
10 Examples of Free Rider Problem
- Using the Neighbor’s Wifi: If you were to use your neighbor’s wifi by somehow guessing their password, then you’ll be a free rider off their internet without actually using it. People might similarly use the Wifi at a café by parking out the front without going in and buying a coffee.
- Group Projects at School: In a group project, some team members may contribute little or no effort, relying on others to do the work while still benefiting from the shared grade or outcome.
- Herd Immunity: When a sufficient number of people get vaccinated against a disease, herd immunity is achieved, protecting even those who haven’t been vaccinated. Some people may choose not to get vaccinated, yet still benefit from the protection provided by others.
- Public Schools: Public school — an institution that welcomes all children, regardless of whether their parents contribute to the funding through property taxes or not — is sustained by the financial support of property taxpayers. Therefore, people who don’t pay taxes can still freeride off the taxpayer and give their children an education.
- Tourism: When tourists visit a city, they get to use a lot of the free public services, such as roads, parks and footpaths, without paying into the general tax revenue of that city. Most cities accept this because tourists also spend money in the city and help create jobs.
- Beach Cleaning: Passionate volunteers often gather on beaches to rid the beach of litter and debris. Most beachgoers don’t participate in this volunteerism, but nonetheless enjoy the spoils of a spotless beach.
- Community Watchers: Community watch programs—the gatekeepers of security and safety in the neighborhood—offer a heightened sense of protection and well-being to participating individuals and their properties and nonparticipants. Those who aren’t participants in the community watch do, nonetheless, benefit from the enhanced sense of safety.
- National Defense: The military provides general safety and security from foreign adversaries. However, not all people step up to be soldiers. So, the rest of us could be considered to be freeriding off the bravery of the few.
- Public Parks: Public parks and other recreation facilities are open to everyone, even though only locals pay city council taxes that ensure their upkeep.
- Open-Source Software: The world of open-source software can be a double-edged sword. On the one hand, it fosters collaboration and encourages innovation. But on the other hand, developers often find themselves grappling with the age-old free rider problem, where users consume their hard work without offering any form of support.
Understanding the Free Rider Problem Through the Prisoner’s Dilemma
The concept of the Prisoner’s Dilemma in game theory offers an effective way to comprehend the free rider problem. It involves two players with a choice between cooperation and defection.
Suppose two individuals find themselves on the wrong side of the law, locked up in separate jail cells (Tuomela, 1988).
Each prisoner is presented with a unique opportunity to converse with their fellow detainee before being cut off from communication for good once the game commences.
If they both cooperate, they receive a light sentence. But should one defect while the other cooperates, then only one is advantaged by this move.
Despite their individual incentives to opt for defection regardless of what their counterpart does, it leads them both into trouble if all go down that route (Tuomela, 1988).
Here is a video overview showing the dilemma in depth:
According to Tuomela (1988), this situation resembles how public goods or shared resources may be underfunded or rendered ineffective when everyone chooses not to contribute despite having reasons individually do so.
That’s why strategies that incentivize group contribution are required.
Reasons for the Free Rider Problem
There are several reasons for the freerider problem, including lack of motivation of some members of the population, and the nature of nonexcludable public goods.
Firstly, there may be an inherent lack of motivation among a small number of individuals. If the perceived benefits of the public good are not worth the effort, then those people may choose not to participate (Pasour, 1981).
Secondly, public goods are non-excludable. This includes goods like streetlights and national defense. This present a challenge because people who don’t pay can still benefit (Kaul, 2003).
Thirdly, a mistrust of the government or authorities can also cause some people to try and avoid paying taxes, getting vaccinated, etc., but will still benefit from others participating for the common good.
Possible Solutions to the Free Rider Problem
The free rider problem can be solved by mandatory or voluntary contributions, incentives, rewards, enforcement, education, or even peer pressure.
Here is a detailed explanation of each of the solutions:
1. Mandatory Contributions
A surefire way to combat the free rider problem is by ensuring everyone who benefits from a public good or shared resource contributes financially.
This can be achieved through strict tax regimes, ensuring that all parties share in the cost of production or upkeep, and so on.
Rewards can be used to encourage individuals or groups to contribute towards a public good or shared resource.
Examples of such incentives include tax deductions, credit points, and discounts on other services/goods.
By offering these rewards, it’s possible to motivate people to participate in collective efforts that benefit everyone!
Go Deeper: Examples of Incentives
When voluntary contributions or incentives aren’t enough, enforcement might be the way to go. To achieve this, specific laws and legal action should be enforced as a punishment for those who don’t contribute.
Raising awareness of the value of supporting public goods and how free-riding can have a negative impact could be the key to inspiring individuals to partake. To do this effectively, we need an extensive communication strategy that will reach out far and wide.
5. Peer Pressure
The power of peer pressure can be a huge motivator for contributing towards public goods and shared resources.
When we feel connected with our friends, family, or coworkers by sharing the same values, this encourages us to follow certain social norms and expectations, which ultimately drive us to act in an appropriate manner.
6. Corporate Support
Another way that many people have solved the free rider problem is to solicit corporate support. For example, the information on this website is free for anyone to access because of the advertising you see on this page. This means that everyone can be a free rider off our writing, and we still get paid – everyone wins!
The free rider problem is a real thorn in the side of society, organizations, and individuals who work hard to create shared public goods.
Unfortunately, it happens when people or groups take advantage of these resources without chipping in – leaving those that put their time and energy into creating them feeling short-changed.
Public goods, which can’t be withheld from anyone (non-excludable) and don’t diminish in availability (non-rivalrous) no matter how much they’re used, are especially prone to free-loaders taking advantage of the situation.
The lack of investment in this problem often leads to inadequate outcomes, placing an onerous strain on those footing the bill.
So, by actively promoting the contribution of resources to public goods, we can ensure a more equitable distribution of costs and rewards among all those affected. This is an essential step in helping everyone involved succeed!
Kaul, I. (2003). Providing global public goods: Managing globalization. Oxford: Oxford University Press.
Pasour, E. C. (1981). The free rider as a basis for government intervention. Journal of Libertarian Studies, 5(4), 453–464. https://philpapers.org/rec/PASTFR-2
Solo, A. M. G. (2014). Handbook of research on political activism in the information age. London: IGI Global.
Tuomela, R. (1988). Free riding and the prisoner’s dilemma. The Journal of Philosophy, 85(8), 421. https://doi.org/10.2307/2027052