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Free Rider Problem

A free rider is a person who benefits from a good or service without paying for it. The free rider problem refers to the difficulty of providing a public good or service when some individuals can consume it without contributing to its production or financing. This can result in under-provision or non-provision of the good or service, since those who would benefit from it have little incentive to pay for it.

Examples of the free rider problem include:

  • Public goods, such as national defence or street lighting, which are difficult to restrict access to and cannot be excluded from non-payers
  • Club goods, such as a community swimming pool or a park, which can be restricted but at a cost
  • Collective goods, such as a clean environment or a stable climate, which are shared by a large number of people and often not restricted or excludable.

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