Share This Article:

Economic Definition of free-rider problem. Defined.

Offline Version: PDF

Term free-rider problem Definition: The inclination to enjoy the benefit of a good without paying for it--if you don't have to. This is the main reason public goods are produced by government. Most people won't voluntarily pay for a public good, because excludability means they can get it without paying--a free ride. With a large number of free riders--perhaps everyone--voluntary payments like those occurring in markets won't provide enough revenue to pay production costs. The only way to finance public goods is to force free-riders, and everyone else, to pay through taxes.

 

« Free Trade Area of the Americas | free-trade area »

Permalink: https://glossary.econguru.com/economic-term/free-rider+problem

Alphabetical Reference to Over 2,000 Economic Terms