positive externality

Definition

Positive effect or benefit realized by a third party resulting from a transaction in which they had no direct involvement. In financial transactions, a positive externality provides benefits to individuals in the form of a "spillover". For example, higher wages and improved health benefits for workers is a positive externality of a company merger. Also called external benefit.

Use this term in a sentence

  • Sometimes a third party may enjoy a positive externality they never could have seen coming after others close a deal.

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  • Even though they weren't sure why they were receiving residuals, the investors happily cashed the checks, learning long ago not to question any positive externality, no matter how mysterious.

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  • The positive externality was not directly accounted for in the journal entry made by the accountant so we made a footnote of it in the report.

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