Free rider problem

Free rider problem

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Encyclopedia
In economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

, collective bargaining
Collective bargaining
Collective bargaining is a process of negotiations between employers and the representatives of a unit of employees aimed at reaching agreements that regulate working conditions...

, psychology
Psychology
Psychology is the study of the mind and behavior. Its immediate goal is to understand individuals and groups by both establishing general principles and researching specific cases. For many, the ultimate goal of psychology is to benefit society...

, and political science
Political science
Political Science is a social science discipline concerned with the study of the state, government and politics. Aristotle defined it as the study of the state. It deals extensively with the theory and practice of politics, and the analysis of political systems and political behavior...

, a free rider (or freeloader) is someone who consumes a resource without paying for it, or pays less than the full cost. The free rider problem is the question of how to limit free riding (or its negative effects). Free riding is usually considered to be an economic problem only when it leads to the non-production or under-production of a public good
Public good
In economics, a public good is a good that is non-rival and non-excludable. Non-rivalry means that consumption of the good by one individual does not reduce availability of the good for consumption by others; and non-excludability means that no one can be effectively excluded from using the good...

 (and thus to Pareto inefficiency
Pareto efficiency
Pareto efficiency, or Pareto optimality, is a concept in economics with applications in engineering and social sciences. The term is named after Vilfredo Pareto, an Italian economist who used the concept in his studies of economic efficiency and income distribution.Given an initial allocation of...

), or when it leads to the excessive use
Tragedy of the commons
The tragedy of the commons is a dilemma arising from the situation in which multiple individuals, acting independently and rationally consulting their own self-interest, will ultimately deplete a shared limited resource, even when it is clear that it is not in anyone's long-term interest for this...

 of a common property resource.
The term free rider comes from the example of someone using public transport
Public transport
Public transport is a shared passenger transportation service which is available for use by the general public, as distinct from modes such as taxicab, car pooling or hired buses which are not shared by strangers without private arrangement.Public transport modes include buses, trolleybuses, trams...

ation without paying the fare
Fare evasion
Fare evasion, as distinct from fare avoidance, is the act of travelling on public transport in disregard of the law and/or regulation, having deliberately not purchased the required ticket to travel . It is a problem in many parts of the world, and revenue protection officers operate on many systems...

. If too many people do this, the system will not have enough money to operate. Another example of a free rider is someone who does not pay his or her share of taxes, which help pay for public good
Public good
In economics, a public good is a good that is non-rival and non-excludable. Non-rivalry means that consumption of the good by one individual does not reduce availability of the good for consumption by others; and non-excludability means that no one can be effectively excluded from using the good...

s that all citizens benefit from, such as roads, water treatment plants, and fire services.

Bargaining


When bargaining, players often bid less than they are prepared to pay in the hope of improving their positions. This creates problems because it is impossible to discover the players' true demand payoff curves, and therefore inefficient allocation of resources is likely to result.

In the context of labor unions, a free rider is an employee who pays no union dues
Union dues
Union dues are a regular payment of money made by members of unions. Dues are the cost of membership; they are used to fund the various activities which the union engages in...

 or agency shop
Agency shop
An agency shop is a form of union security agreement where the employer may hire union or non-union workers, and employees need not join the union in order to remain employed. However, the non-union worker must pay a fee to cover collective bargaining costs...

 fees, but nonetheless receives the same benefits of union representation as dues-payers. Under U.S. law, unions owe a duty of fair representation
Duty of fair representation
The duty of fair representation is incumbent upon U.S. labor unions that are the exclusive bargaining representative of workers in a particular group. It is the obligation to represent all employees fairly, in good faith, and without discrimination...

 to all workers that they represent, regardless of whether they pay dues. Free riding has been a point of legal and political contention for decades.
In Canadian labour law, the Rand formula
Rand formula
In Canadian labour law, the Rand formula is a workplace situation where the payment of trade union dues is mandatory regardless of the worker's union status...

 (also referred to as automatic check-off) is a workplace situation in which the payment of trade union dues is mandatory, regardless of the worker's opinion about the union.

See also

  • Assurance contract
  • Canadians of convenience
    Canadians of convenience
    The term "Canadians of convenience" was coined by Canadian politician Garth Turner in 2006 in conjunction with the evacuation of Canadian citizens from Lebanon during the 2006 Israel-Lebanon conflict...

  • Copyright Infringement
    Copyright infringement
    Copyright infringement is the unauthorized or prohibited use of works under copyright, infringing the copyright holder's exclusive rights, such as the right to reproduce or perform the copyrighted work, or to make derivative works.- "Piracy" :...

  • Criticisms of welfare
    Criticisms of welfare
    The notion, and the extent of, the modern welfare state has been criticised on both economic and social grounds, from both the Left and the Right of the political spectrum.- Libertarian & Conservative criticisms :...

  • Freighthopping
    Freighthopping
    Freighthopping or train hopping is the act of surreptitiously hitching a ride on a railroad freight car. In the United States, this became a common means of transportation following the American Civil War as the railroads began pushing westward, especially among migrant workers who became known as...

  • Inequity aversion
    Inequity aversion
    Inequity aversion is the preference for fairness and resistance to incidental inequalities. The social sciences that study inequity aversion include sociology, economics, psychology, anthropology and ethology.-Human studies:...

  • Leech (computing)
    Leech (computing)
    In computing and specifically Internet, a leech or leecher is one who benefits, usually deliberately, from others' information or effort but does not offer anything in return, or makes only token offerings in an attempt to avoid being called a leech...

  • Moral hazard
    Moral hazard
    In economic theory, moral hazard refers to a situation in which a party makes a decision about how much risk to take, while another party bears the costs if things go badly, and the party insulated from risk behaves differently from how it would if it were fully exposed to the risk.Moral hazard...

  • Parasitism (social offense)
    Parasitism (social offense)
    Social parasitism is a charge that is leveled against a group or class in society which is considered to be detrimental to the whole by analogy with biologic parasitism .-General concept:...

  • Public good
    Public good
    In economics, a public good is a good that is non-rival and non-excludable. Non-rivalry means that consumption of the good by one individual does not reduce availability of the good for consumption by others; and non-excludability means that no one can be effectively excluded from using the good...

  • Stowaway
    Stowaway
    A stowaway is a person who secretly boards a vehicle, such as an aircraft, bus, ship, cargo truck or train, to travel without paying and without being detected....

  • There ain't no such thing as a free lunch
  • Tragedy of the commons
    Tragedy of the commons
    The tragedy of the commons is a dilemma arising from the situation in which multiple individuals, acting independently and rationally consulting their own self-interest, will ultimately deplete a shared limited resource, even when it is clear that it is not in anyone's long-term interest for this...

  • Vaccination policy
    Vaccination policy
    Vaccination policy refers to the health policy a government adopts in relation to vaccination. Vaccinations are voluntary in some countries and mandatory in some countries as part of the public health system...

  • Welfare state
    Welfare state
    A welfare state is a "concept of government in which the state plays a key role in the protection and promotion of the economic and social well-being of its citizens. It is based on the principles of equality of opportunity, equitable distribution of wealth, and public responsibility for those...


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