What is a free rider problem?
The problem with the free rider is a situation where individuals or businesses receive benefits without actually contributing to anything, creating an unfair balance in the distribution of income or other sources. The problem of this type may exist in a number of scenarios, as horseback riding can create financial problems over time that causes the process of unprofitable to all involved. To this end, many businesses will take steps to eliminate free riders and thus minimize the problem.
In order to understand the nature of the problem with the rider of the free rider, it is necessary to first understand what is the free rider. The term has its origin in transport. In recent days, anyone who has been found to be on the scene, or later, a public street car or a metro system without paying as a ticket, was marked as a free rider. Over time, this term meant anyone who benefits from business or investment, but in fact it does not apply to the benefits.
Investing may cause a free rider when the investor buys shares on a margin, but in the end he is unable to collect the resources he pays for these shares. This creates a situation where the mediation involved in the transaction remains unpaid fees for services provided to the investor. At the same time, the inability to pay for the stock also has a negative impact on the seller, sometimes to the extent that it affects their ability to pay for the investment they purchased on a margin. In order to minimize the frequency of this problem, many mediation houses have strict rules that regulate investors' ability to buy on a margin.
businesses can sometimes encounter the problem of free riders. This often happens when traders try to make their shopping area attractive and attractive to shoppers. If one of these stores does not act actively in this effort there is a great chance that the trade will still benefit from PThe more operational operations generated by other stores in this area. In this scenario, others undertake to increase the profitability of the area, while a lonely business that still does nothing, in terms of sales in terms of sales for expenditures and efforts of others in the same area.
The problem of free rider, if not maintained under control, can eventually cause losses to all involved. For example, if enough people manage to use public transport without paying, there is a great chance that the service will be insufficiently financed and must either eliminate some routes or turn off completely. Similarly, the presence of one trade, which is not maintained with the care of other trades in this area, leads to perception that the district is declining and discouraging from some customers from shopping. In the end, it means fewer sales for all shops in the district and maybe Failure of one or more retailers in this area.