Free riding occurs when one firm (or individual) benefits from the actions and efforts of another without paying for or sharing the costs. For example, a retail store may initially choose to incur costs of training its staff to demonstrate to potential customers how a partic- ular kitchen appliance works, in order to expand its sales. However, the customers may later choose to buy the product from another retailer who is able to sell it at a lower price because his business strategy is to do without such training and demonstration, thus avoiding the costs involved. This second retailer is thus viewed as ‘free-riding’ on the efforts and costs incurred by the first retailer, who will lose the incentive to continue demonstrating the product.
Source: Glossary of terms used in EU competition policy, Antitrust and control of concentrations, European Commission, 2002