Coasean Bargaining

Internalizing Externalities via Unified Ownership

A beekeeper's hives are located next to an apple orchard. The bees pollinate the apple trees, which increases the orchard's fruit yield. The apple blossoms provide nectar for the bees, which increases honey production. Initially, the beekeeper and the orchard owner operate as separate businesses and do not coordinate their activities. Which of the following scenarios best demonstrates a private action that leads to these effects being internalized?

The process of internalizing a negative externality, such as pollution from a factory, can only be achieved through direct government action like imposing a tax on the polluter.