To produce honey, beekeepers place hives of bees in the fields of farmers. As bees gather nectar, they pollinate the crops in the fields, which increases the yields of these fields at no additional cost to the farmer. What might be a reasonable private solution to this externality, and how might the solution be reached?

Question

Business

Gary Burke

1 May, 05:28

To produce honey, beekeepers place hives of bees in the fields of farmers. As bees gather nectar, they pollinate the crops in the fields, which increases the yields of these fields at no additional cost to the farmer. What might be a reasonable private solution to this externality, and how might the solution be reached?

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Answers (1)

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Quinn Chen · Answer 1

Bee keepers paying farmers for the extra benefit formers get from the latter, might be a solution to this externality.

Explanation:

Positive Externality is extra positive side effect to third party, without any monetary exchange for the same.

Bee Keepers benefitting from higher honey yield, due to farmer fields pollination & nectar gather, without any payment for the benefit : is an example of positive externality.

In this positive externality, beekeepers are the beneficiary being benefitted by farmer's fields for free. However, the former are not paying any monetary amount to the latter for the benefit.

A private solution to this externality could be found out by : Coase Theorem, which finds an efficient outcome [Internalising extra benefit or harm] by bargaining between the party (ies) having property rights. So : bee keepers paying farmers for the extra benefit formers get from the latter, might be a solution to this externality.