Firms and Collective Reputation: a Study of the Volkswagen Emissions Scandal
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.
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, vol 21(2), pages 484-525.