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The Impact of Environmental Fraud on the Used Car Market: Evidence from Dieselgate

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  • Itai Ater
  • Nir S. Yoseph

Abstract

This study explores the effects of Volkswagen’s 2015 emissions scandal (‘Dieselgate’) on the used car market in Israel. Using a difference‐in‐differences research design and administrative and proprietary data, we find that after Dieselgate the number of transactions involving VW‐manipulated cars fell by 18%, and the resale price of these cars fell by 6%. The drop in the number of transactions was concentrated among private sellers. We discuss alternative explanations and suggest that lower willingness‐to‐pay and adverse selection following Dieselgate could explain our findings.

Suggested Citation

  • Itai Ater & Nir S. Yoseph, 2022. "The Impact of Environmental Fraud on the Used Car Market: Evidence from Dieselgate," Journal of Industrial Economics, Wiley Blackwell, vol. 70(2), pages 463-491, June.
    • Handle: RePEc:bla:jindec:v:70:y:2022:i:2:p:463-491
    DOI: 10.1111/joie.12276
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    References listed on IDEAS

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    1. Rüdiger Bachmann & Gabriel Ehrlich & Ying Fan & Dimitrije Ruzic & Benjamin Leard, 2023. "Firms and Collective Reputation: a Study of the Volkswagen Emissions Scandal," Journal of the European Economic Association, European Economic Association, vol. 21(2), pages 484-525.
    2. Seth Freedman & Melissa Kearney & Mara Lederman, 2012. "Product Recalls, Imperfect Information, and Spillover Effects: Lessons from the Consumer Response to the 2007 Toy Recalls," The Review of Economics and Statistics, MIT Press, vol. 94(2), pages 499-516, May.
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    5. Che, X. & Katayama, H. & Lee, P., 2020. "Willingness to Pay for Brand Reputation: Lessons from the Volkswagen Diesel Emissions Scandal," Working Papers 20/02, Department of Economics, City University London.
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    9. Karpoff, Jonathan M & Lott, John R, Jr & Wehrly, Eric W, 2005. "The Reputational Penalties for Environmental Violations: Empirical Evidence," Journal of Law and Economics, University of Chicago Press, vol. 48(2), pages 653-675, October.
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    Cited by:

    1. Sajid, Muhammed & Zakkariya, K.A. & Suki, Norazah Mohd & Islam, Jamid Ul, 2024. "When going green goes wrong: The effects of greenwashing on brand avoidance and negative word-of-mouth," Journal of Retailing and Consumer Services, Elsevier, vol. 78(C).
    2. Latino, Carmelo & Pelizzon, Loriana & Riedel, Max, 2023. "How to green the European Auto ABS market? A literature survey," SAFE Working Paper Series 391, Leibniz Institute for Financial Research SAFE.
    3. A’aeshah Alhakamy & Areej Alhowaity & Anwar Abdullah Alatawi & Hadeel Alsaadi, 2023. "Are Used Cars More Sustainable? Price Prediction Based on Linear Regression," Sustainability, MDPI, vol. 15(2), pages 1-17, January.

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