In the context of negative externalities, how might regulations influence private incentives according to behavioral economics?

Negative externalities occur when a person's actions have harmful effects on others that are not reflected in the costs of their actions, like pollution from a factory affecting nearby residents. Regulations can help correct these externalities by making companies consider the broader impact of their actions. For example, if a factory is required to pay a tax for the pollution it produces, this tax can make the factory think twice about how much pollution it generates. In this way, regulations change private incentives by encouraging companies to reduce harmful behaviors and invest in cleaner technologies. This helps create a more efficient market where the costs of negative externalities are taken into account, benefiting society as a whole.