Free-Riding in a Public Irrigation Project
A community irrigation project illustrates how positive externalities can lead to the underprovision of public goods due to the free-rider problem. [1, 2, 3] An individual farmer who contributes to the project creates a benefit for all other farmers but does not receive direct payment for this action. [1, 6] This creates an incentive for each farmer to wait for others to contribute, which can result in an equilibrium where no one contributes and the socially beneficial project is not undertaken. [5]
0
1
Tags
Social Science
Empirical Science
Science
CORE Econ
Economy
Economics
Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.10 Market successes and failures: The societal effects of private decisions - The Economy 2.0 Microeconomics @ CORE Econ
Related
Underinvestment in Employee Training as a Positive Externality
Underinvestment in R&D as a Positive Externality
Free-Riding in a Public Irrigation Project
Impracticality of Legal Compensation for Positive Externalities
Pigouvian Subsidies for Positive Externalities
Beekeeper and Honey Production Scenario
Relationship Between Positive Externalities and Public Goods
A company invests heavily in a new technology that makes its manufacturing process cleaner, significantly reducing local air pollution. The company's primary motive was to lower its long-term production costs. As a result, residents in the surrounding area experience improved air quality and health outcomes, although they do not pay the company for this benefit. Which statement best analyzes the economic implications of the company's investment?
The Community Garden Scenario
Evaluating Public Health Policies
Economic Analysis of a Private Garden
When an activity generates a positive externality, the private market equilibrium results in a quantity of the good being produced that is greater than the socially optimal quantity.
A beekeeper places hives next to an apple orchard. The bees pollinate the apple blossoms, which increases the orchard's apple yield, while also producing honey that the beekeeper sells. The beekeeper makes decisions about the number of hives based solely on the profitability of honey. Match each economic term below to the description that best represents it in this scenario.
When the social benefit of an activity is greater than the private benefit received by the decision-maker, a free market without intervention will tend to ________ the activity relative to the socially optimal level.
A new vaccine is developed that protects individuals from a common illness and also reduces its transmission to others. Individuals decide whether to get vaccinated based on their personal cost and perceived health benefit. Arrange the following statements to logically describe the economic outcome in a market without any government intervention.
Evaluating Investment in Foundational Technology
In a market where the consumption of a good generates significant benefits for third parties not involved in the transaction, which of the following statements accurately describes the relationship between the market's demand curve (representing private value) and the social value curve, and the resulting equilibrium?
Comparison of Market Outcomes for Positive and Negative Externalities
Costs and Benefits in the Four-Farmer Irrigation Project Game
The Irrigation Game as a Multi-Player Prisoners' Dilemma
Conflict Between Collective and Individual Interests in the Irrigation Game
Four farmers share access to a water source. They are independently deciding whether to contribute a fixed amount of money to build a shared irrigation system. Each contribution is costly to the individual who makes it, but for every contribution made, all four farmers (including those who do not contribute) receive an equal increase in their crop yield. From the perspective of a single farmer focused on maximizing their own personal outcome, which statement best explains the strategic dilemma they face?
Conflict of Interest in a Shared Resource Scenario
The Farmer's Decision
Analyzing the Free-Rider Incentive
In a scenario where four farmers independently decide whether to contribute to a shared irrigation system, and each contribution benefits all farmers regardless of who pays, the most likely outcome is that all four will contribute because this action maximizes the total benefit for the group as a whole.
In a scenario where several farmers must independently decide whether to contribute to a shared irrigation system, match each element of the situation to its correct economic description.
Modifying Incentives in a Collective Project
Imagine a scenario where four farmers must independently decide whether to contribute to a shared irrigation system. The system is costly for each farmer who contributes, but every contribution benefits all four farmers equally, including those who do not pay. Which of the following statements best analyzes why the group is likely to end up with a less-than-ideal outcome for everyone?
Analyzing Strategic Interdependence in a Collective Project
In a strategic interaction where several farmers must independently decide whether to contribute to a shared irrigation system, the incentive for a farmer to benefit from the system without paying the cost is known as the ________ problem.
Design of a Worldwide Public Good Game Experiment
Free-Riding in a Public Irrigation Project
Learn After
Irrigation Project Incentives
A community of ten farmers considers building a shared irrigation system at a total cost of $1,000. If built, every farmer, including those who do not contribute, will see their crop value increase by $500. The project is not undertaken because no single farmer is willing to pay the full cost, and not enough volunteer to contribute. Which statement best analyzes the core economic reason for this outcome?
Evaluating a Solution to the Free-Rider Problem
The Free-Rider Dilemma in a Community Project
A community of 20 farmers is considering building a shared irrigation ditch. The total cost to build the ditch is $10,000. If built, the ditch will increase the crop yield for each of the 20 farmers, providing an individual benefit of $800 to every farmer, regardless of whether they contributed to the cost. Based on the incentives presented, what is the most likely outcome?
In a scenario where a community irrigation project offers a total benefit to all farmers that is significantly greater than its total cost, it is economically rational for each individual farmer to contribute their share, ensuring the project's completion.
A group of farmers is considering building a shared irrigation system. The project would benefit everyone, but requires contributions to be built. Match each described situation or action with the economic principle it best illustrates.
A community of 50 farmers is considering building a shared irrigation system. The total cost of the project is $20,000. If built, the system will provide a benefit equivalent to $600 to each farmer, regardless of whether they contributed to the cost. This situation often results in the project not being undertaken because individuals are incentivized to wait for others to pay. Which of the following modifications to this scenario would be MOST effective at resolving this issue and increasing the likelihood of the project's completion?
Designing a System to Overcome the Free-Rider Problem
When a community irrigation project benefits all farmers regardless of who pays for it, the incentive for an individual farmer to not contribute and still enjoy the benefits is an example of the ____ problem.
Mitigating Free-Riding with Social Preferences and Norms
Equilibrium of the Irrigation Game