We are independent & ad-supported. We may earn a commission for purchases made through our links.

Advertiser Disclosure

Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.

How We Make Money

We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently from our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

In Business, what is a Free Rider?

Mary McMahon
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

A free rider is a person or entity who benefits from something without contributing as much as other people. The classic example and origin of the term is a free rider on public transportation. People who hop on a bus without paying the fare benefit from the bus paid for by other riders, as well as tax levies that raise money for transportation. If enough people evade the fares, the bus becomes unsustainable to run.

Free riders either consume more of something than others or they contribute less to it, and sometimes both. There are a number of examples of free riders in the business community as a result of the fact that businesses often band together to achieve common goals and even businesses that do not participate receive benefits. A classic example plays out in the downtown districts of many small towns. Business owners form collectives and invest in measures to make downtown more appealing, and businesses that do not contribute still benefit from the increased foot traffic.

When businesses collectively agree to support an endeavor, there is always a risk that a free rider will show up. Structuring endeavors to provide some room for free riders can help businesses manage the free rider problem, but businesses often feel resentful about paying for someone else to benefit. Another example of the free rider problem turns up in patent law, where major companies pay large licenses to other companies to in order to prevent them from enforcing patents against them, and then smaller companies benefit from the lack of enforcement.

This issue can also come up in union workplaces. Workers who belong to a union contribute dues, as well as time for union meetings and votes. In return, the union negotiates better wages and other benefits for them. Workers who are not in the union receive these benefits without having to contribute. A number of tactics are used in union workplaces to discourage free riders, as unions rely on contributions from as many people as possible in order to function.

Resentment about free riders can also play out in social policy. Many nations have systems of taxation with different brackets that are designed to promote fairness by relieving tax burdens on low income members of society. Wealthy members of society may resent the fact that they pay higher taxes and are less likely to use the services paid for with those taxes, arguing that low income people are free riders. However, in social policy as in business, the net good of apparent inequality sometimes outweighs the costs to people who are contributing slightly more.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a SmartCapitalMind researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Discussion Comments

By SlickeNumber — On Mar 18, 2014

Free riding is only a problem when it leads to the non-production or under-production of a public good. It's a difficult situation because, these days, customers expect to pay less but get more - especially in electronics, music, and tech industries.

By Swingerzetta — On Mar 18, 2014

So, what are ways to limit free riding in business? Or is it even an issue that needs to be limited?

Mary McMahon

Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

Learn more
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.