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.
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References in periodicals archive ?
This means that in most cases, a single development will not generate any type of market externality, but it might contribute to such a change in conjunction with other contemporaneous projects, resulting in a critical mass that creates a new equilibrium.
Indeed, there may be cases in which a single development could generate a market externality. This would be so especially in the case of a big-box retailer, such as a Wal-Mart.
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.
In the case of a market externality, this assumption does not work.
Judicial review of zoning decisions should hold the local government accountable for the potential threat of "regulatory opportunism," (303) by which a certain municipality seeks to shoulder a specific negative market externality onto the residents of adjacent localities.
From an economic perspective, a market externality is a process in which a certain market-equilibrium undergoes a change through the price system, implicating numerous parties on both the supply and demand sides.