Consider these situations in which cutting of trees is relevant:

1. The Brown family owns a view house in Perth, Australia. Their neighbours across the street, the Smith family, have trees on their lot that are obstructing the Browns' view of Matilda Bay. The Browns are the only ones affected by the Smiths' trees. The Browns have asked the Smiths to top their trees, but the Smiths refuse to do so. The Browns have also offered to pay the Smiths for the topping and an additional S500 to cover any loss they might feel because their tall trees were topped. The Smiths still refuse.

2. The Brown family, the Green family, the White family, and the Blue family own view houses in Perth, Australia. Their neighbours across the street, the Smith family, have trees on their lot that are obstructing everyone's view of Matilda Bay. The Browns, Greens, Whites, and Blues have asked the Smiths to top their trees, but the Smiths refuse to do so.

3. Timber companies in southwestern Australia sometimes use clear-cutting on oldgrowth forests. Environmentalists have asked the companies to change this practice because it leads to reduced biodiversity.

Why is there no market failure in the first situation involving the Smiths and the Browns? Why may there be market failure in the situation with several families? Why is there market failure in the third situation involving the timber companies?