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Explain using an example how free-riding can result in below efficient output levels.

Explain using an example how free-riding can result in below efficient output levels.

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The essential idea of the free rider is that users use a particular commodity without having to pay for it themeselves. A very good example would be say the use of a wireless internet connectivity portal. The users of this facility would benefit from the internet connectivity as they have paid for it. However, those staying in the floor above or below will also benefit from the internet facility even though they haven't paid for it. This is a good example of the free rider problem. This hampers efficiency in that the amount that should be produced to meet demand is not being produced. This results in underproduction. The use of the wireless facility by those who havent paid for it is a good example of the free rider problem.

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