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

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  • Ruediger Bachmann
  • Gabriel Ehrlich
  • Ying Fan
  • Dimitrije Ruzic
  • Benjamin Leard

Abstract

This paper uses the 2015 Volkswagen (VW) emissions scandal as a natural experiment to provide evidence that collective reputation externalities are economically significant. Using a combination of difference-in-differences and demand estimation approaches, we document a spillover effect from the scandal to the non-VW German auto manufacturers. The spillover amounts to an average drop of $2,057 in consumer valuations of these manufacturers’ vehicles and to a 34.6% reduction in their annual sales. We substantiate our interpretation that the estimates reflect a reputation spillover using data on internet search behavior and direct measures of consumer sentiment from Twitter.

Suggested Citation

  • Ruediger Bachmann & Gabriel Ehrlich & Ying Fan & Dimitrije Ruzic & Benjamin Leard, 2019. "Firms and Collective Reputation: a Study of the Volkswagen Emissions Scandal," NBER Working Papers 26117, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:26117
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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment

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