The free-rider problem arises when individuals can enjoy the benefits of a public good without contributing to its provision. This represents a market failure, as it creates incentives for people to withhold payment, assuming others will cover the expenses. Consequently, if widespread free-riding occurs, the public good may not be supplied or sustained adequately, since private producers lack motivation to offer it without assured revenue. An illustration is citizens benefiting from national defence without paying taxes.
free-rider problem
« Back to Glossary Index