Question

5. Explain how some parents’ decision to not immunize their children, hoping that all other children have been vaccinated, could be an example of a free riding.

How and why is this parents’ behavior dangerous to the public? Be as specific as possible.

Define what free riding is, what types of goods/services are likely to suffer from it, use the idea of MSC and MPC and clearly state what has to happen such that this behavior of the parents was classified as a free riding and created a negative externality.

Answer 1

Free riding in economics is the problem associated with the use of Public good when the user of a good do not pay or under pay for a use of public good but he can not be excluded form its use because of the non-excludability characteristics of Public goods. Mainly Public goods and services which are of communal nature suffer from free rider problem.

Some parents decision of not to immunize their children hoping that all other children have been vaccinated is an example of free riding. This is because those parents who get their children vaccinated incurrs a cost of vaccination for which they have some benefit, but the benefit of vaccinating their children is also received by those children who are not vaccinated without paying anything for it, so it is an example of free riding.

The idea of Marginal Social Cost (MSC) and Marginal Private Cost (MPC) can be used to find that this is an example of free riding because when the parents decide not to immunize their childern, than the MPC of those parents for vaccination is 0. But the overall marginal cost of vaccination i.e. MSC is higher. So when MSC>MPC, there is the problem of free riding and this free riding will cause a negative externality.

This behaviour of the parents create negative externalities in the economy and hence are dangerous to the public because, since their children had not been vaccinated they may catch the diseases against which they are not vaccinated and hence there is a threat to the whole society. Though other children are vaccinated bit still there is a little chance of catching that disease if it is found nearby. So this causes negative externality and hence market failure.