Suppose two neighbors share a park. One neighbor, Al, leaves trash in the park. This bothers the other neighbor, Bert. According to Coase's Theorem, one way to alleviate the externality is that

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According to Coase's Theorem, if property rights are well-defined and transaction costs are low, then it doesn't matter who has the initial right to use the property. In this case, either Al or Bert could own the park, as long as they negotiate a mutually beneficial agreement regarding the use and maintenance of the park. For example, Al could agree to not leave trash in the park if Bert agrees to help with the upkeep or pays Al for the right to a clean park. Therefore, the best choice to alleviate the externality is for either Al or Bert to own the park.

Suppose Two Neighbors Share a Park