A familiar example of a negative externality is loud music in a busy park on a weekend. In principle, it should be possible to solve this externality by permitting park visitors to negotiate rights to play music in particular locations or at specific times. The most likely reason these negotiations do NOT occur is that:

Question

Quizplus · Accepted Answer

The bargaining costs of identifying and establishing communications between all affected parties would be high, as there are likely multiple individuals and groups affected by the loud music in the park, and negotiating individual rights to play music at specific times and locations would be a complicated and time-consuming process.

A Familiar Example of a Negative Externality Is Loud Music