This leads to market failure and thus, public goods need to be provided by the government or some sort of collective action.
Underproduction of Goods: The existence of free riders may result in the underproduction or non-production of public goods as the benefits are enjoyed by all, but the costs are borne only by the few who contribute.Non-excludability means that individuals cannot be effectively prevented from using the good, leading some people to consume without paying, hence becoming free riders. Public Goods and Non-Excludability: The Free Rider Problem mainly arises with regard to the provision of public goods which are non-excludable and non-rivalrous.The phonetic pronunciation of “Free Rider Problem” is: /friː raɪdər ˈprɑbləm/ Key Takeaways This can lead to underproduction or overuse of the resource, ultimately leading to market inefficiencies.
It occurs when the usage of a public good or service is not restricted and individuals are not charged proportionately for its use. The Free Rider Problem refers to a situation in an economic system where certain individuals consume more than their fair share of a resource, or pay less for it, while others pay for the cost.
