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A positive externality arises in a situation where a third party, outside the transaction.

The world of business is constantly changing.

All the time, new technologies are being introduced and old ones are being retired.

One of these changes that most people don’t think about is what happens when a third party enters the equation.

When this happens, there can be both negative and positive consequences to take into account.

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The purpose of this blog post is to explore one such situation in detail.

The “Third Party Effect.” In 1993, Leslie Pahl and William Pulak studied the effect of a third party entering into negotiations.

They found that when two parties were negotiating with one another.

In other words, once there is someone else present at the negotiation table who can make decisions for them .

Act as their advocate during these discussions-whether it’s a boss, spouse or friend.

Then individuals are less likely to fight for what they want because they know that person will take care of them. This is called “the Third Party Effect.” 

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