What is an example of a private solution to an externality?

A private solution to an externality involves individuals or businesses addressing the issue directly among themselves without government intervention. Offering to pay someone to change their behavior embodies this principle, as it demonstrates a straightforward direct negotiation between parties affected by an externality.

For instance, if a factory's pollution affects a nearby property owner's well-being, the factory owner could offer to compensate the property owner to change their practices or to mitigate damage. This kind of negotiation allows both parties to reach a mutually beneficial agreement, thus internalizing the externality.

The other examples provided show public solutions or actions taken through legal or regulatory frameworks rather than private negotiations. Lobbying for regulatory changes, filing lawsuits, or reporting to governmental authorities all involve seeking intervention from external parties (government or legal systems) instead of resolving the issue directly between the affected parties.