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

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  • Yoseph, Nir Shlomo

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.

Suggested Citation

  • Yoseph, Nir Shlomo, 2018. "The Impact of Environmental Fraud on the Used Car Market: Evidence from Dieselgate," CEPR Discussion Papers 12899, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:12899
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    Cited by:

    1. Inge van den Bijgaart & Davide Cerruti, 2020. "The effect of information on market activity; evidence from vehicle recalls," CER-ETH Economics working paper series 20/343, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    2. 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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    More about this item

    Keywords

    Secondary markets; Durable goods; Vehicles; Reputation; Fraud; Product recall;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment

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