Free-rider problem

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Figure 1. The Amedee Lighthouse on the French overseas dependent territory of New Caledonia.[1]

When a person enjoys the benefits of a public good without contributing to the cost of it, they are known as a free-rider.[2] National Defense suffers from the free-rider problem, if a person does not pay for national defence, they cannot be exempt from its benefits (i.e. being protected from an attack).[3]

To combat the free-rider problem, user fees can be charger to ensure that all who benefit from the use of the public good contribute to its cost. Lighthouses are an example of a public good which everyone (any ship using its light) benefits from but not every ship pays for the service it provides. If ships were charged a fee every time they used the light house (a fee at the port they enter) then the free-ride would not exist.[4]

See Also

Excludable Non-Excludable
Rival Private good Common resource
Non-Rival Club good Public good

References

  1. Wikimedia Commons. [Online], Available: https://commons.wikimedia.org/wiki/File:Amedee_Lighthouse_-_New_Caledonia.jpg [Aug 17, 2016]
  2. A. Goolsbee, S. Levitt and C. Syverson. Microeconomics. New York: Worth Publishers, 2013, pp. 674.
  3. J.B. Taylor. Economics. Boston: Houghton Mifflin Company, 1995, pp. 512.
  4. J.B. Taylor. Economics. pp. 513.

Authors and Editors

Lyndon G., Jason Donev
Last updated: September 17, 2016
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