THE DISTINCTION BETWEEN TRUE AND INDUCED FREE RIDERS - AN APPLICATIONTO GATT DE-FACTO MEMBERSHIP

In the former international trade organization, GATT, there were 28 co untries who were free riders through a special class of de facto membe rship. This article distinguishes between two classes of free riders, true and induced depending on whether the free riders, if faced with e xclusion, would be willing to pay the full cost of membership and join , or whether they would opt out of membership. A legit model of GATT m embership is used to predict whether these de facto countries would ha ve joined GATT as full members. Those that would join are considered t rue free riders, whereas those that would not join are considered indu ced riders. II is estimated that approximately 20 of the 28 defacto co untries were true free riders. The distinction between true and induce d free riders is important because in a free rider situation,only the true free riders contribute to an undersupply of the good.