Final answer:
Free riders lead to an under-supply of public goods because individuals may choose not to contribute towards their provision, expecting to use the good without paying. This results in the public good potentially never being provided or being provided in insufficient quantities, leading to social inefficiencies.
Step-by-step explanation:
When free riders become involved with a public good, the good tends to be under-supplied rather than over-supplied. Free riders are individuals who want others to pay for the public good and then plan to use the good themselves without contributing to the cost. Since public goods are nonexcludable and once provided are available to all, this leads to situations where individuals can consume the good without paying for it.
Consuming without paying is attractive, but it also means that rational individuals may decide not to contribute, anticipating that others will cover the cost. This collective action problem results in fewer people willing to pay for the good and, hence, the good may never be provided or be provided in an insufficient quantity. The free rider problem can be illustrated using the prisoner's dilemma, which shows the challenges in oligopoly decision-making in Monopolistic Competition and Oligopoly. Furthermore, without sufficient supply, the social benefit of the public good, which is greater than the cost of provision, is not fully realized, leading to inefficiencies in the market.