Externality

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Related to Market externality: Positive externality

Externality

The cost or benefits of a transaction to parties who do not directly participate in it. Externality can be either positive or negative. For example, a merger can lead to higher share prices and bonuses for employees, benefiting shareholders and employees at the two companies merging, This can create wealth and positively impact a community. On the other hand, the merger can drive a competitor out of business, which results in layoffs and reduced wealth, which can hurt a community. Externality is also called spillover or the neighborhood effect. See also: External benefit, External cost.
References in periodicals archive ?
From an economic perspective, a market externality is a process in which a certain market-equilibrium undergoes a change through the price system.
253) When this is the case, identifying a market externality or designing an adequate regulatory response (whether through a limit on land use, quota setting, or a fee system) needs to be completed within a broader picture of the changing landscape of the city.
Indeed, there may be cases in which a single development could generate a market externality.
From a legal perspective, the generation of a market externality should be considered blameless conduct, with no clear division between wrongdoer and victim.
These observations do not preclude the possibility that in some cases, the regulation of a market externality must go beyond fixed formulas to provide a proper solution.
When a market externality is concerned, the "substantial relation" or "reasonable relationship" tests, while generally more lenient, may prove the only feasible way for courts to address the legal validity of zoning mechanisms intended to address market externalities.