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Seinfeld Economics: The Stakeout

by Linda Ghent

An externality is a situation in which the private costs or benefits to the producers or purchasers of a good or service differs from the total social costs or benefits entailed in its production and consumption. An externality exists whenever one individual's actions affect the well-being of another individual -- whether for the better (positive externality) or for the worse (negative externality).

The Coase theorem states that, when trade in an externality is possible and there are no transaction costs, bargaining will lead to an efficient outcome regardless of the initial allocation of property rights.

 

Seinfeld: The Stakeout

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Jerry accompanies Elaine to a piano bar. He meets a girl he likes at the dinnertable, as a piano plays in the background. She asks, "How much do you suppose it'd take to get him to stop?" Jerry says, "I'm in for $5." She replies, "I'll supply the hat." This is a private solution to the externality.

from Seinfeld, Season 1 (1990)
Creator: Larry David & Jerry Seinfeld
Posted by Linda Ghent
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