If property rights to the river are ill defined, what problems may occur?
Imagine that many businesses are located beside a river, into which they discharge industrial waste. There is a city downstream, which uses the river as a water supply and for recreation.
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If the property rights to the river and its water are not well defined in this case, problems will arise between the city and the businesses over the use of the river. The businesses have an interest in dumping their waste. By using the river, they cut down on their costs. The city has an interest in keeping the river clean. It needs the river for water and so that its citizens can engage in recreational activities (making the city more attractive to potential residents). The two interests are opposed to one another in this case. If it is not clear as to who owns the river (and assuming there are no environmental laws, the city and the upstream businesses will come into conflict because they both want to use the river in ways that infringe on the other's desired use.
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