Farmer Joe uses Roundup Ready soybeans and sprays his crop with Roundup in order to control weeds. Farmer Jane lives next to Farmer Joe, and Jane is using conventional soybeans and organic practices to earn a premium for organic soybeans for Whole Foods edamame. But, Joe's Roundup drifts onto Jane's crop and potentially contaminates the product, thereby forcing Jane to lose her premium. If the cost to Jane for lost revenue is greater than the cost to Joe for not using Roundup, we would expect:
Jane could negotiate with Joe to curtail his use by helping cover his increased cost, thereby reducing the externality.
There is no possible solution for Jane and Joe.
Jane should simply quit growing organic soybeans to avoid the problem.
Jane could not negotiate with Joe to help pay his increased costs and so the externality will remain present.