What conditions must be met for private bargaining to be effective in resolving an externality?

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Quizplus · Accepted Answer

In order for private bargaining to be effective in resolving an externality, bargaining costs must be low so that it is feasible for parties to negotiate and reach agreements. Clear property rights are also important, as parties need a basis for understanding what actions are within their rights and what actions are prohibited. This helps to establish liability and incentivize efficient behavior.

What Conditions Must Be Met for Private Bargaining to Be