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The Impact of Product Recalls on the Secondary Market:Evidence from Dieselgate

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  • Ater, Itai
  • Yosef, Nir

Abstract

We examine the effects of Volkswagen's emissions scandal (`Dieselgate`) on the secondary car market in Israel. Using administrative data on all car transactions in Israel, we measure the scandal's effect on the number and the composition of transactions involving used vehicles made by the Volkswagen Group. We also use data from the leading classified ad website and measure the effect of the scandal on the resale price of used Volkswagen vehicles. According to our findings, the Volkswagen emissions scandal had a statistically significant negative effect on the number of transactions involving vehicles made by Volkswagen (nearly -18.0%) and on their resale price (nearly -6.0%). We also find that the reduction in the number of transactions was driven mostly by private sellers and that non-private sellers barely shied away from the market. We discuss potential explanations for these findings.

Suggested Citation

  • Ater, Itai & Yosef, Nir, 2018. "The Impact of Product Recalls on the Secondary Market:Evidence from Dieselgate," CEPR Discussion Papers 12899, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12899
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. 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.

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    More about this item

    Keywords

    Durable goods; Product recall; Secondary market; Vehicles;
    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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