How does liability affect prices? Railroad sparks and timber

Colin Doran and Thomas Stratmann

International Review of Law and Economics, 2021, vol. 66, issue C

Abstract: This paper analyzes how judicially-determined liability assignments affect valuations and prices. On two occasions in 2007, a railway company caused a fire to break out in the State of Washington. The two fires burned down some of the neighboring properties’ timber. These two incidents led to two companion court cases that made it all the way to the Washington Supreme Court. The court rulings, both made on May 31, 2012, held that the railway company was not liable for timber damages under Washington’s timber trespass statute, despite having acted negligently. As a consequence of these decisions, economic theory predicts a decrease in the value of timber in those areas associated with higher risk of fire, and an increase in the value of Washington railway companies. Using a triple difference model and an event study, we test and find evidence supporting this prediction.

Keywords: Liability; Property rights; Law and economics; Event study (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S014481882100003X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:irlaec:v:66:y:2021:i:c:s014481882100003x

DOI: 10.1016/j.irle.2021.105979

Access Statistics for this article

International Review of Law and Economics is currently edited by C. Ott, A. W. Katz and H-B. Schäfer

More articles in International Review of Law and Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().