Free Rider Problem – Climate Change

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The free rider dilemma is a market failure that occurs when people profit from common good or mutual capital without adding to them. People who use public goods without paying their due share in the form of taxation, for example. The free-rider dilemma exists mostly in markets where supply is not diluted by the people who use it and therefore cannot be limited. Free riding will primarily be used to procure products and resources such as flood protection, access to clean water, public broadcasting, national security, and climate change. Some of the people and nations do not contribute towards climate change, but they enjoy the benefits to clean environment.

My bid strategy was simple to start by bidding low with the first bid being $60. Primarily, I had to consider the maximum amount I could make per bid as the total for the three round should have been lower than $250. Moreover, the second bid was a little bit higher than the first bid with an amount of $100. From the second bid, I was making the maximum bid to ensure that people live in the safe and clean environment. The third bid came a little bit lower than the second bid but higher than the first bid as I had already tested the waters and the total need to be below the $250 ceiling.

The bidding strategy was effective as it enabled me to identify some of the major precautions to take on when placing bids. Primarily, I got to utilize all the available cash indicating the procedure was adequate for the mechanism. Moreover, on my side, I got to use my skills to make my bidding strategy useful. Primarily, the exercise is a good reflection of the free rider problem that many people and nations are experiencing around the world. From the exercise, some people did not contribute to the climate change, and the target was not meet. Primarily, the will benefit from the program as there is no mechanism to exclude them from the advantages of the program. Free rider problem is experience everywhere mainly in public goods and services where people do not contribute to the program, but they benefit from it.

There was no adequate communication with classmates to enable solve the free rider problem as the instructor did not allow the students to communicate with each other during the project. Students were to make bids on their own without the influence of their classmates. Moreover, the projects was a good example of the why it is hard to address the global environment problems. This is because some nations are not willing to contribute to solving the global environmental issue or they provide little funds to tackle the problem. The free rider problem is a matter that will continue to exist for a long time because some people are reluctant to make a contribution to finance public goods. This means that the problem of free rider will continue to exist mainly in places or incidences that involve public goods. Moreover, the exercise represents a good example of the problem that the world is facing on issues to do with climate change were some of the nations are not active or contributing to solving the global problem yet they expect to benefit.

November 23, 2022


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