ABSTRACT
This chapter introduces new solutions to the free rider problems in networks. The chapter explains why FairTorrent (a peer-to-peer [P2P] model) and similar tit-for-tat (TFT) P2P systems are not efficient and how, contrary to the literature, free riding may be beneficial. The information producer modeled herein is not a traditional profit-maximizing entity but rather is piracy averse, has limited control over the P2P network or client-server network, sells short-lived products, and is most interested in long-term profits. The free riders (network members) are generally self-interested, loss-averse, and price-sensitive persons who derive mostly nonmonetary utility from consumption of digital content. Free riding can be knowing or involuntary. The P2P and client-server networks discussed herein are anonymous legal networks, and thus the effects of actual or potential coordination and/or altruism among customers are somewhat limited.
