Bailing On the Car That Wasn't Bailed Out: Bounding Consumer Reactions to Financial Distress

Cristian Huse () and Nikita Koptyug

No 1093, Working Paper Series from Research Institute of Industrial Economics

Abstract: This paper examines how consumers react to the financial distress of durable goods manufacturers by looking at the Swedish new car market. We employ a difference-in-differences matching methodology whereby we compare sales of carmaker Saab with those of a carefully constructed control group of substitute products. To account for possible substitution between products in the treatment and control groups, we propose and apply bounds to our difference-in-differences matching estimator. We then refine the bounds and provide conditions under which they depend only on the products' own- and cross-price elasticities. We find that even accounting for potential substitution, there was a significant decrease in the sales of Saab following its filing for administration. These findings are robust to a number of robustness checks and alternative hypothesis.

Keywords: Administration; Automobiles; Bankruptcy effects; Brand loyalty; Bounds; Consumer reaction; Consumer response; Difference-in-differences; Durable goods; Financial distress; Treatment effects (search for similar items in EconPapers)
JEL-codes: C21 D12 D22 G32 G33 L62 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2015-11-13
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Bailing on the Car That Was Not Bailed Out: Bounding Consumer Reactions to Financial Distress (2017)
Working Paper: Bailing on the car that wasn’t bailed out: bounding consumer reactions to financial distress (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:1093

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