Question

Since many people browse for products in a store, but then purchase them online, firms are less likely to hire knowledgeable sales staff. This is due to _________.

1. The free-rider problem

2. Tragedy of the commons

3. Moral hazard

4. Compensating wage differential

Answer 1

Answer: The free-rider problem

It is the problem or a type of burden created due to an overuse of a resource that is publicly available. The 'free riding user' does not find any incentive paying for the resource that he/she uses which is publicly available, thus not paying at all for the resource he/she uses to acquire some benefit derived out of it.

In the above case of a store, where the products for sale are available to be browsed freely, people use this availability to browse the product, to get to know more about it and understand it's features as they cannot touch / feel / and understand a product's features in person while purchasing the same online. Thus they exploit and overuse this resource and finally result in purchasing the product online, where it is available cheaper.

A solution that store owners can do is to bring incentives for purchasing the product at the store such as discounts , warranty etc and hire more skilled sales staffs to make more sales from the people who walk in the store to check out the products.