Consider a situation with a negative externality where the affected parties can negotiate with each other without any cost. If the legal system grants the property right to the party causing the harm, the resulting level of the externality-producing activity will be higher than if the right were granted to the party suffering the harm.
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Consider a situation with a negative externality where the affected parties can negotiate with each other without any cost. If the legal system grants the property right to the party causing the harm, the resulting level of the externality-producing activity will be higher than if the right were granted to the party suffering the harm.
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