• Free Rider Problem
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World Trade Organization - Principles of the trading system
1
#'Reciprocity'. It reflects both a desire to limit
the scope of Free rider problem|free-riding
that may arise because of the MFN rule, and
a desire to obtain better access to foreign
markets. A related point is that for a nation to
negotiate, it is necessary that the gain from
doing so be greater than the gain available
from unilateralism|unilateral liberalization;
reciprocal concessions intend to ensure that
such gains will materialise.B. Hoekman, The
WTO: Functions and Basic Principles, 43
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Open source - Alternatives
* For own use - Businesses or individual
software developers often create software to
solve a problem, bearing the full cost of initial
creation. They will then open source the
solution, and benefit from the improvements
others make for their own needs.
Communalizing the maintenance burden
distributes the cost across more users; free
rider problem|free riders can also benefit
without undermining the creation process.
1
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Competition law - Neo-classical synthesis
1
Sources of this market power are said to
include the existence of externalities,
barriers to entry of the market, and the
free rider problem
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MyCityDeal - Collective buying business model
In doing so, users or consumers are
protected from the free rider problem where
individuals looking for a free ride ride the
discounted savings of others who paid to
bring the deal-of-the-day to the actualization
threshold.[http://www.mycitydeal.co.uk/howdoes-mycitydeal-work How It Works]
MyCityDeal Rather, users are only charged
when the required number of people sign up.
1
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Assurance contract
1
An 'assurance contract', also known as a
'provision point mechanism', is a
Mechanism design|game theoretic
mechanism and a Financial
engineering|financial technology that
facilitates the voluntary creation of public
goods and club goods in the face of the
free rider problem.
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Assurance contract
1
The free rider problem is that there may be
actions that would benefit a large group of
people, but once the action is taken, there
is no way to exclude those who did not
pay for the action from the benefits
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Brainstorming - Sources of brainstorming inadequacy
On the other hand, the variations on
brainstorming that produce the social
matching effect would necessarily violate
Osborn's principle of focus on quantity
while those that produce the free rider
problem and evaluation apprehension
would necessarily violate defer judgment
1
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Free rider problem
1
Free riding may be considered as a 'free
rider problem' when it leads to underprovision of goods or services, or when it
leads to overuse or degradation of a
common property resource
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Strategic alliance - Disadvantages
* Agency costs: As the benefit of
monitoring the alliance's activities
effectively is not fully captured by any firm,
a free rider problem arises (the free rider
problem seems to be less pronounced in
settings with multiple strategic alliances
due to reputational effects).
1
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Tragedy of the commons - Garrett Hardin's essay
1
Overall, Hardin argues against relying on
conscience as a means of policing
commons, suggesting that this favors
selfish individuals– often known as Free
rider problem|free riders– over those who
are more altruistic
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Global public good - Challenges to the traditional definition
Such a company, then, becomes a
corporate free rider problem|free rider,
driving up the cost of the public goods of
clean air and water, which are often
Transnationality|transnational resources.
1
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Homo economicus - Responses
Free rider problem|Free riders, for
example, would have a major negative
impact on the provision of public goods
1
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Public good
1
Public goods problems are often closely
related to the Free rider problem|free-rider
problem, in which people not paying for
the good may continue to access it, or the
tragedy of the commons, where
consumption of a shared resource by
individuals acting in their individual and
immediate self-interest diminishes or even
destroys the original resource
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Public good - The free rider problem
This is called the free rider problem, or
occasionally, the easy rider problem
(because consumers' contributions will be
small but non-zero)
1
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Public good - The free rider problem
The free rider problem depends on a
conception of the human being as homo
economicus: purely rational and also
purely selfish—extremely individualistic,
considering only those benefits and costs
that directly affect him or her. Public goods
give such a person an incentive to be a
free rider.
1
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Public good - Privileged group
1
The existence of privileged groups may
not be a complete solution to the free rider
problem, however, as underproduction of
the public good may still result
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Public good - Merging free riders
Another method of overcoming the free
rider problem is to simply eliminate the
profit incentive for free riding by buying out
all the potential free riders
1
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Public good - Introducing an exclusion mechanism (club goods)
1
Although they can address the free rider
problem, the downside of these laws is
that they imply private monopoly power
and thus are not Pareto-optimal.
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Private good
1
Unlike public goods, private goods are less likely to
have the free rider problem
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Environmental economics - Common goods and public goods
1
A country's incentive to invest in carbon
abatement is reduced because it can Free
rider problem|free ride off the efforts of
other countries
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Web 2.0 - Characteristics
1
The impossibility of excluding group
members who don’t contribute to the
provision of goods from sharing profits
gives rise to the possibility that serious
members will prefer to withhold their
contribution of effort and Free rider
problem|free ride on the contribution of
others.
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Environmental policy - Rationale
1
The free rider problem is when the private
marginal cost of taking action to protect
the environment is greater than the private
marginal benefit, but the social marginal
cost is less than the social marginal
benefit
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Labor rights
Labor counters that the
open shop leads to a free
rider problem.
1
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Social movements - Dynamics of social movements
One of the main difficulties facing the
emerging social movement is spreading
the very knowledge that it exists. Second
is overcoming the free rider problem convincing people to join it, instead of
following the mentality 'why should I
trouble myself when others can do it and I
can just reap the benefits after their hard
work'.
1
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Social movements - Framing perspective
1
In doing so, this general cultural approach
also attempts to address the Free rider
problem|free-rider problem
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Externality - Implications
1
Positive externalities are often
associated with the free rider
problem
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Collective action - Exploitation of the great by the small
1
Poorer individuals will usually have little
choice but to opt for the Free rider
problem|free rider strategy, i.e
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Index of economics articles - F
* Factor price equalization – Factors of
production – Fair trade – Feminist
economics – Finance – Financial astrology
– Financial capital – Financial economics
– Financial instrument – Fiscal policy –
Fisher equation – Fisher separation
theorem – Forecasting – Fractionalreserve banking – Free good – Free rider
problem – Free trade – Friedman rule –
Full-reserve banking
1
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Colonization of Phobos - Objections
1
The fundamental problem of public things,
needed for survival, such as space
programs, is the free rider problem
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Inequity aversion - Punishing unjust success and game theory
1
Without IA's rejection of injustice, stable
cooperation would be harder to maintain
(for instance, there would be more
opportunities for successful free rider
problem|free riders).http://epub.ub.unimuenchen.de/726/1/FehrSchmidt_Handbook_2005-Munichecon.pdf
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Microeconomics - Externalities and market failure
1
This period also marks the beginning of
mathematical modeling of public goods
with Paul Samuelson|Samuelson's “The
Pure Theory of Public Expenditure”
(1954), in it he gives a set of equations for
efficient provision of public goods (he
called them collective consumption
goods), now know as the Samuelson
condition. He then gives a description of
what is know called the free rider problem:
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Journal of Political Economy - Notable papers
1
:: ... suggested Tiebout model|non-political
solutions to the free rider problem in local
governance.
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Alternative compensation system
Other models, such as the street
performer protocol or voluntary collective
licenses, could arguably be called
alternative compensation systems
although they are very different and
generally less effective at solving the free
rider problem.
1
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Lindahl tax - Demand revelation
1
The Demand Revelation theory uses the
Clarke tax or pivot mechanism, to ensure
that individuals will consider the fact that
their choices have a social cost on the
social outcome, thus ensuring that they
truthfully reveal their preferences,and
hence overcoming the free rider problem
of public goods
provisioning.[http://www.progress.org/fold1
83.htm Fred Foldvary on Demand
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Affordable Care Act - Background
It was championed for a time by
conservative economists and Republican
Party (United States)|Republican senators
as a market-based approach to healthcare
reform on the basis of individual
responsibility and avoidance of free rider
problems
1
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Affordable Care Act - Healthcare debate, 2008–10
1
With universal health care|universal healthcare as
one of the stated goals of the Obama
administration, congressional Democrats and
health policy experts like Jonathan Gruber
(economist)|Jonathan Gruber and David Cutler
argued that guaranteed issue would require both
community rating and an individual mandate to
ensure that adverse selection and/or Free rider
problem|free riding would not result in an Death
spiral (insurance)|insurance death spiral; they
convinced Obama that this was necessary, and
persuaded him to accept congressional proposals
that included a mandate
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Affordable Care Act - Insurance exchanges and the individual mandate
1
These regulations are enabled to function
due to the #Overview of
provisions|individual mandate — the
requirement to buy insurance or pay a
penalty—and the limits on open
enrollment, without which healthy people
might Free rider problem|put-off insuring
themselves until they got sick
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Moody's - 1970s to 2000
As well, the major agencies began
charging the issuers of bonds as well as
investors mdash; Moody's began doing
this in 1970 mdash; thanks in part to a
growing free rider problem related to the
increasing availability of inexpensive
Photocopier|photocopy machines, and the
increased complexity of the financial
markets
1
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Opportunism - Game theory
Two classic cases discussed in game
theory where opportunism is often
involved are the free rider problem and the
prisoner's dilemma.Reinhard Bachmann
and Akbar Zaheer (eds.), Handbook of
trust research
1
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Credit rating agency - Post-depression era
1
In the late 1960s and 1970s, ratings were
extended to commercial paper and
Deposit account|bank deposits. Also
during that time, major agencies changed
their business model by beginning to
charge bond issuers as well as investors.
Reasons for this change included a
growing free rider problem related to the
increasing availability of inexpensive
Photocopier|photocopy machines, and the
increased complexity of the financial
markets.
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Signalling theory - Costly signalling in hunting
2000Hawkes 1993 Instances that are
particularly inconsistent with the delayed
reciprocity hypothesis are those in which a
hunter shares his kill indiscriminately with
all members of a large group.Wiessner
1996 In these situations, the individuals
sharing meat have no control over whether
or not their generosity will be reciprocated,
and Free rider problem|free riding
becomes an attractive strategy for those
receiving meat
1
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Right-to-work law - Opponents
This creates a free rider
problem[http://www.ipspr.sc.edu/grs/SCCE
P/Articles/interest_groups_in_south_caroli
n.htm The South Carolina Governance
Project— Interest Groups in South
Carolina,] Center for Governmental
Services, Institute for Public Service and
Policy Research, University of South
Carolina, Accessed July 6, 2007
1
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Union shop - Canada
1
Rand went further to argue that the free
rider problem undermines workplace order
by causing resentment between union and
non-union employees.Kaufman, p
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Union security agreement - Rationale
1
ISBN 0-912051-02-7 There are alternative solutions
to the free rider problem in labor relations
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Parable of the broken window - Defenses
1
One prominent example are public goods
which are prone to the free rider problem
and hence are subject to their over or
under production.
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Squeeze out - Process
Hence the acquirer is able to capture
almost all the value added from the
merger and, as in the leveraged buyout, is
able to effectively eliminate the free rider
problem
1
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Commercial use of copyleft works - Development
1
Thus avoiding a type of free
rider problem.
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The Federal Reserve Act - Implications and Impacts of the Federal Reserve Act
[http://www.jstor.org/stable/2601371
Origins of the Federal Reserve System:
International Incentives and the Domestic
Free Rider Problem International
Organization, Winter, 1999] The absence
of a central banking structure in the U.S
1
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Participatory economy - Critique of markets
Ambiguity over who has the property right,
polluters or pollution victims, free rider
problems among multiple victims, and the
transaction costs of forming and maintaining
an effective coalition of pollution victims, each
of whom is affected to a small but unequal
degree, all combine to render market
systems incapable of eliciting accurate
information from pollution victims about the
damages they suffer, or acting upon that
information even if it were known.Robin
Hahnel, (2004)
1
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Advocacy groups - Benefits and incentives
1
Known as the free rider problem, it refers
to the difficulty of obtaining members of a
particular interest group when the benefits
are already reaped without membership
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Minarchism - Ideology
Some minarchists support taxation on
principle or see it as a Lesser of two evils
principle|necessary evil to address the free
rider problem, while others believe it is
morality|morally wrong
1
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Private defense agency - Financing of private defense agencies
Specifically, the free rider problem, in
which people refuse to pay for defense but
instead rely on their neighbors to pay for
defending the community, is said to make
it inevitable that it be financed by taxes if
an equitable allocation of costs is to be
achieved
1
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Free-market roads - Private roads can have no free riders, reducing congestion
1
The free rider problem has been cited by
some proponents as a reason for
privatizing roads: since traffic congestion
is the result of excess demand for
transportation infrastructure, it may be
treated as any other economic shortage in this case, a shortage of roads, lanes,
exits, or other infrastructure
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The Logic of Collective Action - Overview
1
The book argues instead that individuals in
any group attempting collective action will
have incentives to Free rider problem|free
ride on the efforts of others if the group is
working to provide public goods.
Individuals will not “free ride” in groups
which provide benefits only to active
participants.
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Vaccination policy - Individual versus group goals
1
Governments often allow exemptions to
mandatory vaccination for religious or
philosophical reasons, but if too many of
these exemptions are granted, the
resulting free rider problem may cause
loss of herd immunity, substantially
increasing risks even to vaccinated
individuals.
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Health care in the United States - Prescription drug prices
position (consistent with the primary
lobbying position of the Pharmaceutical
Research and Manufacturers of America)
is that the governments of such countries
are free rider problem|free riding on the
backs of U.S
1
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Communications Workers of America v. Beck - Further Supreme Court rulings
Writing for the majority, Justice Blackmun
established a three-prong test for determining
the constitutionality and statutory legality of
agency fee charges in public employee
bargaining units: 1) The charges must be
germane to collective bargaining activity; 2)
The charges must not significantly burden the
non-members' free speech rights; and 3)
Charges must be justified by the need for
labor peace or to avoid the free rider
problem.Lehnert v
1
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AUSFTA - Pharmaceutical Benefits Scheme
1
While the scheme is very effective at keeping
many drug prices low, pharmaceutical
corporations in both the US and Australia are
wary of the operation of the scheme, since
they argue that higher drug prices are
necessary to fund the costs of research and
development. The American pharmaceutical
companies claim that in enjoying low-cost
medicines, Australians are essentially Free
rider problem|free riding on the costs of
research performed in the U.S.
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Americans with Disabilities Act - Abuse
1
As one law review article pointed out, the
perception that the ADA primarily helps
free rider problem|freeloaders was harshly
satirized by The Onion in 1998 in the form
of an article about the Americans With No
Abilities Act.Gina M
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Balance of power (international relations) - Buck passing and bloodletting
Some realists believe there is a strong
tendency to buck-pass or Free rider
problem|free-ride within balancing
coalitions themselves, usually leaving their
alliance partners to assume the heavy
burden of wearing down the enemy,
leaving the free-rider’s military fresh to win
the final battles of the war and thus be in a
better position to dictate the peace, such
as the UK’s light involvement in the early
stages of World WarI
1
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TANSTAAFL - Meanings
1
(See Free rider problem and
Tragedy of the commons.)
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Co-operation (evolution) - Direct Fitness Benefits
Cooperation is maintained in situations
where Free rider problem|free-riding is a
problem through enforcement, which is the
mechanism where the actor is rewarded
for cooperating or punished for not
cooperating
1
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FELDA - Scheme management
1
However, the settlers did not prefer this
scheme, as workers who did not tend to
the land properly still benefited (a sort of
free rider problem)
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Fallacy of composition - Examples
1
In the free rider problem, an individual can
benefit by failing to pay when consuming a
share of a public good; but if there are too
many such free riders, eventually there will
be no ride for anyone.
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Net bias - Concerns about political discrimination
Many ISPs contend that major content
providers such as Google or Yahoo! enjoy
a Free rider problem|free ride
1
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Public goods game - Results
Depending on the experiment's design,
those who contribute below average or
nothing are called defectors or free rider
problem|free riders, as opposed to the
contributors or above average contributors
who are called cooperation|cooperators.
1
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Public goods game - Income variation
1
A public goods games variant suggested
as an improvement for researching the
free rider problem is one in which
endowment are earned as Household
income|income. The standard game (with
a fixed initial endowments) allows no work
effort variation and cannot capture the
Marginal rate of substitution|marginal
substitutions among three factors: private
goods, public goods, and leisure.
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Public goods game - Implications
Part of the economic theory of public
goods is that they would be underprovided (at a rate lower than the ‘social
optimum’) because individuals had no
private motive to contribute (the free rider
problem|free rider problem)
1
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Social loafing
1
Social loafing can be explained by the free
rider problem|free-rider theory and the
resulting sucker effect, which is an
individual’s reduction in effort in order to
avoid pulling the weight of a fellow group
member.
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Social loafing - Motivational strategies
'Minimize free riding:' Free rider
problem|Free riding occurs when
members do less than their share of the
work because others will make up for their
slack
1
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WTO - Principles of the trading system
1
# 'Reciprocity'. It reflects both a desire to limit
the scope of Free rider problem|free-riding
that may arise because of the MFN rule, and
a desire to obtain better access to foreign
markets. A related point is that for a nation to
negotiate, it is necessary that the gain from
doing so be greater than the gain available
from unilateralism|unilateral liberalization;
reciprocal concessions intend to ensure that
such gains will materialise.B. Hoekman, The
WTO: Functions and Basic Principles, 43
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Economics of climate change mitigation - Heterogeneity
1
Nations that avoid mitigation can benefit
from free rider problem|free-riding on the
actions of others, and may even enjoy
gains in trade and/or investment (Halsnæs
et al., 2007:127)
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Leech (computing)
1
In computing and specifically Internet, a
'leech' is one who benefits, usually
deliberately, from others' information or
effort but does not offer anything in return,
or makes only token offerings in an
attempt to avoid being called a leech. In
economics, this type of behavior is called
free riding and is associated with the free
rider problem.
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Solidarity lending - Distinctiveness
1
* small enough to ensure a maximum level
of joint responsibility and discourage free
rider problem|free riders, and
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Signalling (economics) - Assumptions and groundwork
1
Bad employees aren't upset about this,
because they get a free rider problem|free
ride from the hard work of the good
employees
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Eurobonds
1
Because Eurobonds would allow already
highly indebted states access to cheaper
credit thanks to the strength of other
Eurozone economies, they are
controversial, and may suffer from the free
rider problem.
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Eurobonds - Critics
1
The planned introduction of Eurobonds has
been criticised by economists for economic
reasons such as the Free rider problem or
Moral
Hazard.[http://www.voxeu.org/index.php?q=n
ode/6899 voxeu.org] Beside economic
grounds, mainly legal and political reasons
are mentioned which could prohibit the
introduction of Eurobonds: Article 125 of the
Lisbon Treaty states explicitly that the
European Union and its member states are
not liable for the commitments of other
members
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History of citizenship - Civic-republican view
1
A general problem with this conception,
according to critics, is that if this model is
implemented, it may bring about other
issues such as the free rider problem in
which some people neglect basic
citizenship duties and consequently get a
free ride supported by the citizenship
efforts of others
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Rodney Stark - On the growth of Christianity
1
This is consistent with Stark's published
observations of contemporary religious
movements, where once-successful faith
movements gradually decline in fervor due
to the free rider problem.
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Financial core - Impact
1
Opponents of the decision to declare financial
core status note that it weakens the union
which won the benefits enjoyed by all
workers, even those not bound by union
rules. Some claim that financial core
members are essentially free rider
problem|free riders. However, fi-core workers
still pay the majority of union dues; for
example, the Financial Core Status deduction
for non-members of the Writers Guild of
America, West over April 2013–March 2014
was 12.10% less than the regular dues.
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Vaccine controversy - Individual liberty
1
Exempting some people from mandatory
vaccination results in a free rider problem,
in which a few individuals gain the
advantage of herd immunity without
paying the cost; too many exemptions may
cause loss of herd immunity, substantially
increasing risks even to vaccinated
individuals.
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Box-Office Bunny - Plot
1
The would-be Free rider problem|free rider
stumbles on the usher, Elmer. To divert
attention from his own illegal entry, Daffy
drives Elmer to further focus on Bugs. He
also join forces with him against Bugs.
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