Question

Offering contributors private goods such as coffee mugs, books, or magazine subscriptions will _______ the free-rider problem and lead to a ________ level of contribution to the public good.

a) Reduce; higher
b) Increase; lower
c) Increase; higher
d) Have no effect on

Answer 1

Private goods do not solve the free rider problem and may lead to lower contribution levels.

Step-by-step explanation:

The act of offering contributors private goods such as coffee mugs, books, or magazine subscriptions will not have an effect on the free-rider problem and may actually lead to a lower level of contribution to the public good.

The free rider problem occurs when individuals have an incentive to let others pay for the public good and then benefit from it without contributing. In this case, offering private goods may not solve the problem because individuals can still choose to free ride on the donations of others.

For example, if NPR offers coffee mugs to its listeners as a reward for contributing to their fund-raising effort, some listeners may still choose not to contribute and instead rely on the contributions of others to maintain the station. Offering private goods does not address the underlying incentive to free ride.