Free Rider Problem and Public Goods
- AS, A Level, IB
- AQA, Edexcel, OCR, IB, Eduqas, WJEC
Last updated 20 Apr 2021
The free rider problem leads to under-provision of a good or service and thus causes market failure.
Pure public goods are not normally provided by the private sector because they would be unable to supply them for a profit. For example, national defence is a pure public good that will not be provided at all if the government does not provide it because of the free rider problem.
The free rider problem leads to under- provision of a good or service and thus causes market failure.
Free riders have little or no incentive to reveal how much they are willing and able to pay for a public good because they can enjoy a benefit without paying.
Overcoming the free rider problem
- Compulsory taxation to fund collective provision of services such as national defence systems
- Appealing to people’s altruism and sense of social purpose
- Community solutions for example establishing social norms to manage common pool resources such as fishing grounds and grazing land
- Government legislation – regulations enforceable in law such as fishing quotas, copyright and patent laws to protect intellectual property
You might also like
Exam support for 2022
Online Grade Booster Courses for A-Level Exams in May & June 2022
Exam technique, advance information support, live revision and more from the tutor2u subject specialist teams