Working Paper: CEPR ID: DP12899
Authors: Itai Ater; Nir Shlomo Yoseph
Abstract: This study explores how exposure of fraud committed by a durable-goods manufacturer affects secondary markets for that manufacturer’s products. Specifically, we examine the effect 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-mishandled 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 reputational concerns and adverse selection following Dieselgate could explain our findings.
Keywords: secondary markets; durable goods; vehicles; reputation; fraud; product recall
JEL Codes: D12; D80; L14; L62
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Dieselgate scandal (F18) | decrease in transactions involving VW manipulated vehicles (L62) |
| Dieselgate scandal (F18) | decrease in resale price of VW manipulated vehicles (L42) |
| Dieselgate scandal (F18) | decrease in transactions among private sellers of VW manipulated vehicles (L81) |