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The free rider problem - Journal of Omnifarious

Apr. 24th, 2012

10:18 am - The free rider problem

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This problem exists in many more contexts than people might otherwise think of. I came to this realization recently while talking with someone about why I really did think her choice to shop around based on price was an admirable one even if I, personally didn't do it.

In that context, I'm a free rider. I reap the benefits of the people who do shop around because they create an incentive for merchants to lower prices. But I do not engage in behavior that will create those incentives myself because it's costly in terms of time and attention.

Similarly, people who use technology that's closed and locked down are free riders on people who consciously make choices to not use such technology. It can be argued that almost every innovative thing we've seen on the Internet in the last 10 years is a direct result of openness and a lack of concern, or even outright hostility towards the idea of 'intellectual property'. Oh, it's true that individual innovators sometimes try to achieve locks. But because of people like me, that generally causes their product to not succeed as well as those who don't. And once the open product achieves critical mass, network effects and the overwhelming advantages of openness do the rest and drive the close product to the fringes of the market.

I don't think free riders are actually necessarily bad. A significant number of them can make markets inefficient. But maybe then people don't actually care about those kinds of inefficiencies. If they did, they would make different choices.

But looking at these things as a free rider problem is a really interesting perspective. And I think the idea is much more broadly applicable than it has been.

It also explains why free riders will not necessarily kill the creation of new and interesting stuff. There are many parts of the market that thrive even when there are a significant number of free riders. When something in the market changes enough that people get upset over the inefficiency created, they stop being free riders.

Please reply to my original post on Dreamwidth. If you don't have an account there you can log in using your LiveJournal account. Just login using OpenID and give http://<LJ account name>.livejournal.com/ as your OpenID. For example, for the LJ user rosencrantz319 that would be http://rosencrantz319.livejournal.com/ as their OpenID.

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