Free Rider Problem

1. In economics, the free rider problem refers to a situation where some individuals in a population either consume more than their fair share of a common resource, or pay less than their fair share of the cost of a common resource.

2. In the context of a brokerage firm, a free rider problem refers to a situation where a client has been allowed to purchase shares without actually paying for them, and then subsequently sells the shares (ideally for profit).

1. A commonly used example of the economic notion of the free rider problem is found in national defense. All citizens of a country benefit from being defended; however, individuals who evade taxes are still protected by the same common resource of national defense, even though they did not pay for their fair share of the resource.

2. The problem with this scenario is that the client, if allowed to free ride, can profit from a stock trade without actually using any of his or her own capital. This is illegal.


Investment dictionary. . 2012.

Look at other dictionaries:

  • Free rider problem — For the article about when a brokerage client purchases shares beyond his or her means, see free riding. In economics, collective bargaining, psychology, and political science, a free rider (or freeloader) is someone who consumes a resource… …   Wikipedia

  • Free-Rider-Problem — Das Trittbrettfahrerproblem (auch free rider problem) bezeichnet ein Problem kollektiven Handelns, bei dem Wirtschaftssubjekte den Nutzen eines Gutes ohne Gegenleistung erlangen. Der Name leitet sich von einer Form des Schwarzfahrens bei… …   Deutsch Wikipedia

  • free-rider problem — situation in which every individual improves his or her financial situation under the erroneous assumption that the general economic condition will not be harmed …   English contemporary dictionary

  • Free rider — may refer to the following:* the free rider problem in economics and collective bargaining * a stowaway * a game hosted on OneMoreLevel.com reminiscent of the popular webgame/webtoy Line RiderSee also Conductor (transportation) or Freedom… …   Wikipedia

  • Free Rider — Das Trittbrettfahrerproblem (auch free rider problem) bezeichnet ein Problem kollektiven Handelns, bei dem Wirtschaftssubjekte den Nutzen eines Gutes ohne Gegenleistung erlangen. Der Name leitet sich von einer Form des Schwarzfahrens bei… …   Deutsch Wikipedia

  • Free riding — (also known as Freeriding or Free riding) is a term used in the stock trading world to describe the practice of buying shares or other securities without actually having the capital to cover the trade. This is possible when recently bought or… …   Wikipedia

  • Free ride — may refer to: * Freeriding, a style of snowboarding * Freeride, a branch of mountain biking * In finance ** Free riding, buying stocks without the money to cover the purchase ** Free rider problem, how to prevent free riding * Free Ride (TV… …   Wikipedia

  • Free Riding — Das Trittbrettfahrerproblem (auch free rider problem) bezeichnet ein Problem kollektiven Handelns, bei dem Wirtschaftssubjekte den Nutzen eines Gutes ohne Gegenleistung erlangen. Der Name leitet sich von einer Form des Schwarzfahrens bei… …   Deutsch Wikipedia

  • Trittbrettfahrer-Problem — Das Trittbrettfahrerproblem (auch free rider problem) bezeichnet ein Problem kollektiven Handelns, bei dem Wirtschaftssubjekte den Nutzen eines Gutes ohne Gegenleistung erlangen. Der Name leitet sich von einer Form des Schwarzfahrens bei… …   Deutsch Wikipedia

  • Malibu surfer problem — In political theory, the Malibu surfer problem is the prospect of an individual who can work but chooses not to do so, and instead leads a life of self indulgence funded through some other available means of support. The phrase refers to an… …   Wikipedia

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.