Pick Your Group Size: A Better Procedure to Resolve the Free-Rider Problem in a Business Simulation


  • Precha Thavikulwat
  • Jimmy Chang


A procedure for resolving the free-rider problem that does not use peer evaluations is incorporated into a business simulation. The procedure consists of four parts: tracking each participant’s actions, assigning participants to groups based on each participant’s preferred group size, allowing each participant one opportunity to switch groups, and giving incremental credit towards grades each period based on the midpoint between the individual’s performance and the average performance of the members of the individual’s group. The simulation incorporating the procedure was administered as a single exercise to 139 students in Hong Kong and the United States. As hypothesized, Hong Kong students preferred larger-size groups than U.S. students, size preferences of both Hong Kong and U.S. students were distributed bimodally, and those not assigned to their preferred group size were no more likely to switch groups than those who were assigned to their preferred group size. About 6.90% of the 29 multi-person groups were troubled by free riders, significantly less than the 27% of a previous study that used peer evaluations.