Other things equal we expect that the greater the number of parties experiencing the externali- the greater will be the costs of monitoring damage Nevertheless, private cooperation appears effective in some situations. instance, neighborhood associations sometimes do agree on mutually restrictive covenants, and individual neighbors occasionally do reach contractual agreements on such as light (which deal the ows cast by buildings) there is an important case where Coase-like solutions do arise, even with large of or neg established by usage; (2) the value of the externality (whether positive ative) land (3) considerable time has passed such that the initial stock of external parties has rolled over and externality levels remain stable. The of these con- ditions can best be explained with an example. Suppose that a factory has been pol the surrounding area for many years without anyone property val right to do probable that the pollution will in lower have to sell ues 23 Residents who bought before the pollution was anticipated will their houses for the impact of the pollution. homeowners however, will not be bearing any Pareto-relevant externality, because the negative impact of the pollution will be capitalized into house prices. The lower prices of the reflect the valuation of the pollution. In other disutili- through the house price it is possible to get a measure of the who pollution. Notice that a second generation of homeowners (that is, those re- bought houses after the was known and capitalized into prices) would the factory had to compensate allocation rights were changed so that of course, if there are current homeowners for levels new informa tion about the unexpected changes in the level of pollution (or information harmful impacts of the pollution-see our discussion of im asymmetry below), there will be, in effect, new (either positive or negative) has pacts; in these situations, considerable argument is likely to occur over who rights to compensation for the changes.