Economics Game Theory In Behavioral Economics Questions
Free riding refers to the behavior of individuals who benefit from a public good without contributing to its provision. In game theory, free riding is a common problem that arises in the context of public goods games.
In the provision of public goods, individuals have an incentive to free ride because they can enjoy the benefits of the public good without incurring the costs of contributing to its provision. This is due to the non-excludability nature of public goods, meaning that once they are provided, it is difficult to exclude anyone from benefiting from them.
The presence of free riding can lead to under-provision of public goods. Rational individuals may choose not to contribute to the provision of a public good, expecting others to contribute instead. As a result, if everyone follows this logic, the public good may not be provided at all or be provided at a suboptimal level.
To address the issue of free riding and encourage the provision of public goods, various mechanisms can be employed. These include government intervention, such as taxation and regulation, to ensure the provision of public goods. Additionally, social norms, reputation, and voluntary contributions can also play a role in mitigating free riding behavior and promoting the provision of public goods.