Andy goes to the hospital for a broken nose, but it turns into a rant session for Ben. It turns out the roommate situation between Ben, April, and Andy hasn’t been ideal because Andy and April continue to use his things without his permission. Andy and Ben negotiate for ways to remedy the externality on their own. If property rights are well established (Ben does own his stuff!) then two parties can work out externalities without government intervention.

See more: bargaining, Coase Theorem, common resources, externalities, negative externalities, private costs, private goods, public goods, social benefits, social costs, transaction costs, types of goods