How do negative externalities, such as pollution, affect consumer behavior according to behavioral economics?

Negative externalities, like pollution, affect consumer behavior by changing how people perceive the costs and benefits of their choices. When a company produces goods that create pollution, the harmful effects are not always reflected in the price of those goods. This means consumers might buy more of those products than they would if they understood the full impact, leading to overconsumption. For example, if a factory releases smoke into the air, consumers might enjoy the low prices of its products but overlook the health risks associated with that pollution. Behavioral economics suggests that when people are made aware of these hidden costs, such as through education or better regulations, they may choose to buy cleaner alternatives or support policies that reduce pollution.