Chapter 10

the uncompensated impact of one person's actions on the well-being of a bystander

altering incentives so that people take account of the external effects of their actions

the proposition that, if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own

the costs that parties incur in the process of agreeing and following through on a bargain

a tax enacted to correct the effects of a negative externality