Firms and Collective Reputation: a Study of the Volkswagen Emissions Scandal

Bachmann, Rüdiger, Gabriel Ehrlich, Dimitrije Ruzic and Ying Fan

No 12504, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper uses the 2015 Volkswagen emissions scandal as a natural experiment to provide evidence that collective reputation externalities matter for firms. We find that the Volkswagen scandal reduced the U.S. sales of the other German auto manufacturers— BMW, Mercedes-Benz, and Smart—by about 105,000 vehicles worth $5.2 billion. The decline was principally driven by an adverse reputation spillover, which was reinforced by consumer substitution away from diesel vehicles and was partially offset by substitution away from Volkswagen. These estimates come from a model of vehicle demand, the conclusions of which are also consistent with difference-in-differences estimates. We provide direct evidence on internet search behavior and consumer sentiment displayed on social media to support our interpretation that the estimates reflect a reputation spillover.

Keywords: Automobiles; Collective reputation; Demand estimation; Difference-indifferences; Google trends; Reputation externalities; Twitter sentiment; Volkswagen emissions scandal (search for similar items in EconPapers)
JEL-codes: D12 D22 D90 L14 L15 L62 (search for similar items in EconPapers)
Date: 2017-12
New Economics Papers: this item is included in nep-ene, nep-env and nep-tre
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Citations: View citations in EconPapers (12)

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Related works:
Working Paper: Firms and Collective Reputation: a Study of the Volkswagen Emissions Scandal (2019)
Working Paper: Firms and Collective Reputation: A Study of the Volkswagen Emissions Scandal (2017)
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