Pecuniary externality

A pecuniary externality is an externality which operates through prices. For example, an influx of city-dwellers buying second homes in a rural area can drive up house prices , making it difficult for young people in the area to get onto the property ladder .

This is in contrast with real externalities which have a direct impact on a third party. For example, pollution from a factory directly harms the environment.

Both Pecuniary and real externalities can be either positive or negative.