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Explain How a Free Rider May Arise on a Public

question 141

Essay

Explain how a free rider may arise on a public good and describe the consequences of the free rider problem.


Definitions:

Stock Option

A financial derivative that gives the buyer the right, but not the obligation, to buy or sell a stock at an agreed-upon price within a certain period.

Listed

Refers to a security that is traded on an official stock exchange.

Contract

A legally binding agreement between two or more parties that defines and governs the rights and duties of those parties.

Put Option

An agreement in finance that permits the owner to sell a predetermined quantity of a basic asset at an agreed price during an established timeframe, without being compelled to do so.

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