Accounting
Examples of General Reserves
February 18, 2023
Accounting
Types of Reserves
February 18, 2023

Free riding is a situation where a person or entity who/ benefits from a resource free of charge- that is, without paying for it, either in terms of economic resources or efforts. In other words, free riders are those who take advantage of a resource (such as a public good) or even an existing situation to secure “free” gains or benefits.

Free riding implies that others bear part of the costs of such resources, or are subject to specific entry or utilization barriers, while a free rider does not, and is not. If a large number of people act as free riders, the public resources or existing situation may be exhausted, prompting a government or authority to interfere by either charging costs across the board or raising utilization barriers without exceptions.

This situation is commonly referred to as a free rider problem. In its effect, it is very much similar to a situation in economics known as tragedy of the commons.

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