Free rider problem
Definition. The free rider problem arises when individuals can enjoy the benefits of a good without paying for it, because the good is non excludable and one person cannot be prevented from consuming it. Since rational consumers withhold payment, the private market fails to supply the good, illustrating why public goods are not provided by the free market.
This problem explains why public goods such as national defence must be financed and provided by the government through taxation rather than left to private firms.
This term belongs to Public Goods in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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