Free rider problems tend to be largest when
A) workers are paid by a piece-rate system.
B) workers are paid by group incentives.
C) workers are paid on commission.
D) firms are very small.

Question

Quizplus · Accepted Answer

Free rider problems tend to be largest when workers are paid by group incentives, as it becomes difficult to identify individual contributions and thereby lead to some members of the group taking advantage of the efforts of others. Piece-rate system and commission based-pay models are based on individual performance, and firms that are very small may have better communication and monitoring systems to prevent free riding.

Free Rider Problems Tend to Be Largest When