How does the Coase theorem suggest that government intervention can address negative externalities in a market failure scenario?

The Coase theorem suggests that when people can negotiate without cost, they can solve problems caused by negative externalities on their own. A negative externality happens when someone’s actions harm others, like pollution from a factory affecting nearby residents. The theorem argues that if property rights are clearly defined, the affected parties can come together to agree on a solution that benefits everyone. For example, if a factory pollutes a river, the factory and local fishermen can negotiate a payment for the pollution or find a way to reduce it, avoiding the need for government rules. However, if negotiation fails or costs are high, government intervention may be necessary to regulate the pollution and protect the community.