A Textbook Example of the Free-Rider Problem

The other day one of my colleagues commented that he's surprised students are willing to buy (cheaper) international editions of textbooks. This form of price discrimination allows low-income foreigners to buy otherwise prohibitively expensive textbooks. But when American students buy international editions, they increase the demand - and thereby the textbook price - for foreigners. "Don't American students have any sympathy for foreigners?" he wondered.

My colleague (an economist, by the way) didn't recognize that even if American students care about the welfare of foreigners, they still have a strong in incentive to buy international editions. This is a "textbook" case of the free-rider problem. A single student who refrains from buying the international edition bears the entire cost of paying a higher price. She does not, however, receive the benefits of knowing foreign students can buy affordable textbooks, since she recognizes other American students won't similarly refrain. Perceiving that others will buy the international edition, each student has an incentive to buy the cheaper textbook.

This free-rider problem could be overcome through the legal system. But I don't know (a) if buying (or selling) international editions in America is illegal, or (b) if any government agency enforces these laws if they do exist. My students don't know the answer either, so if such laws exist, they're obviously not an effective deterrent.