Private owners can gain by employing their resources in ways that are beneficial to others, and they bear the opportunity cost of ignoring the wishes of others. Realtors often advise home owners to use neutral colors for countertops and walls in their house because they will improve the resale value of the home. As a private owner you could install bright green fixtures and paint your walls deep purple, but you will bear the cost (in terms of a lower selling price) of ignoring the wishes of others who might want to buy your house later. On the other hand, by fixing up a house and doing things to it that others find beneficial, you can reap the benefit of a higher selling price. Similarly, you could spray paint orange designs all over the outside of your brand-new car. but private ownership gives you an incentive not to do so because the resale value of the car depends on the value that others place on it.
Consider a parcel of undeveloped privately owned land near a university. The private owner of the land can do many things with it. For example, she could leave it undeveloped. turn it into a metered parking lot, erect a restaurant, or build rental housing. Will the wishes and desires of the nearby students be reflected in her choice, even though they are not the owners of the property? Yes. Whichever use is more highly valued by potential customers will earn her the highest investment return. If housing is relatively hard to find but there are plenty of other restaurants, the profitability of using her land for housing will be higher than the profitability of using it for a restaurant. Private ownership gives her a strong incentive to use her property in a way that will also fulfill the wishes of others. If 5he decides to leave the property undeveloped instead of erecting housing that would benefit the students, she will bear the opportunity cost of forgone rental income from the property.
As a second example, consider the owner of an apartment complex near your campus. The owner may not care much for swimming pools, workout facilities, study desks, washers and dryers, or green areas. Nonetheless, private ownership provides the owner with a strong incentive to provide these items if students and other potential customers value them more than it costs to provide them. Why? Because tenants will be willing to pay higher rents to live in a complex with amenities that they value. The owners of rental property can profit by providing an additional amenity that tenants value as long as the tenants are willing to pay enough additional rent to cover the cost of providing it. Because renters differ in their preferences and willingness to pay for amenities, some will prefer to live in less expensive apartments with fewer amenities, while others will prefer to live in more expensive apartments with a greater range of amenities. By choosing among potential apartment complexes, renters are able to buy as few or as many of these amenities as they wish.