Free Rider Problem

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The free rider problem is a collective action problem arising from non-excludability.

A non-excludable good is a good whereby it is not possible to exclude people from using the good, thereby making it difficult to restrict access to the good based on price.

A good or service is non-excludable when it is not possible to prevent people from deriving benefit from the good. The significance is that it is difficult to make money selling a non-excludable good, because access to it cannot be restricted.


A lighthouse: When a lighthouse is built, all ships that come in vicinity of the lighthouse are able to use it. The ships that use the lighthouse without funding it are "free riders;" absent coercion, they will be able to get away without funding the lighthouse commensurate with the utility they derive from it.

Information: Information is difficult to produce in its first incarnation, but easy to replicate once it has been produced. IP protections are used as a remedy for this problem.

Defense: Defending a piece of land theoretically protects everyone who inhabits that land, without discrimination with respect to who funded the defense.