Question

Economists believe the free rider problem is very important in complex business organizational structures. Still, businesses continue to build teams to solve problems or to deliver products to consumers. Often special rewards or bonuses are provided to the team rather than to the individuals on the team. Write a brief essay that either defends the economists' concern or explain why economists are wrong on this issue.

Answer 1

Free-rider problem is a type of market failure that occurs when those who benefit from resources, public goods, or services of a communal nature do not pay for them but continue to access it.The free-rider problem is an issue that most likely is present among many companies in the United States as of to date. Although research has proven the efficiency of teamwork, companies must critically address the free-ride problems in order to prevent major burdens and issues. Throughout this course, we have read about companies who have failed miserably about addressing issues within their organizational architecture and such has led to their failure as a company/business.

In this case, economists have a valid case in regards to rewards and bonuses being offered to the overall team when the free-rider problems are still existent. The issue with such reward is that individuals who do not provide any or the same amount of effort as other team members are still benefiting from the team’s rewards or bonuses; this can become costly and cause additional burdens. In this case, Brickley, et.al. (2009) provide different solutions in regards to solving the free-rider problems among companies. First, peer evaluations allow team members to evaluate each other’s performances and efforts in regards to a specific project; this can allow the company to determine what individuals are providing the necessary and equal effort to achieve the projected goal. In addition, when creating teams, companies should create assigned tasks by which each individual will hold a certain amount of accountability. Moreover, the company must implement an effective management, incentive, and evaluation plan in regards to teams and teamwork in order to avoid the free-rider problem.