Collective reputation matters for firms

This paper uses the 2015 Volkswagen emissions scandal as a natural experiment to provide evidence that collective reputation externalities matter for firms. We find that the Volkswagen scandal reduced the U.S. sales of the other German auto manufacturers—BMW, Mercedes-Benz, and Smart—by about 105,000 vehicles worth $5.2 billion. The decline was principally driven by an adverse reputation spillover, which was reinforced by consumer substitution away from diesel vehicles and was partially offset by substitution away from Volkswagen. These estimates come from a model of vehicle demand, the conclusions of which are also consistent with difference-in-differences estimates. We provide direct evidence on internet search behavior and consumer sentiment displayed on social media to support our interpretation that the estimates reflect a reputation spillover.

That is from a new NBER Working Paper by Ruediger Bachmann, Gabriel Ehrlich, Ying Fan, and Dimitrije Ruzic.

Comments

Sad, since apparently whatever Volkswagen did was done by others. Also my first BMW car got me laid in the USA, which reminds me of a joke by Jay Leno along those lines involving a girl, an older man, and an ATM vs a gym Nautilus machine.

Das Racist. One German automaker did wrong, so they must all be wrong.

Any guesses what Boeing will do for American exports?

Maybe the VW scandal was a revelation that Germany is far more corrupt than most Americans would have thought. Stereotypes are good rules of thumb not universal truths.

If so it would be sensible of Americans to assume "they're all at it". As indeed they were, weren't they?

It's a separate issue that German cars have been comically overrated for decades.

No, it wasn't just one German automaker.

"Daimler will recall 60,000 Mercedes diesel cars in Germany after it was found that the cars had software that distorts emission tests, the German Transportation Ministry announced over the weekend.

Daimler has confirmed that the Mercedes-Benz GLK 220, produced between 2012 and 2015 has been ordered to be recalled, but they also declared that they would appeal the decision."

https://interestingengineering.com/daimler-must-recall-60000-mercedes-cars-for-emissions-breach

Computerized systems and software lend themselves to this because they are so opaque to the users. This is why we should not vote using computerized machines or the internet.

It was a very German sort of corruption, when I heard it all I could think was how Teutonic of them.

So, an elaborate way of stating that legal persons aka corporations are subject to the same biases as physical persons, including prejudicial assumptions about criminality on the basis of ethnicity.

Who cheats more: Huawei, Volkswagen, Facebook, or Boeing? Big businesses are so lovable aren't they?

Do any of them cheat more than any politician?

'Big businesses are so lovable aren't they?'

Well, if you love 'abstract, shark-like legal entities devoted to commercial profit,' then definitely.

No accounting for taste when it comes to love letters and who receives them, as mass murderers in prisons can attest.

Isn't it a bias against diesel not the auto makers? People buy diesel for better fuel efficiency (even though diesel fuel costs a little more). The Volkswagen scandal raised doubts about the fuel efficiency advantage and, thus, fewer people bought them. Maybe I am giving buyers of cars more credit than they deserve. Maybe they bought diesel for inexplicable reasons. Or maybe they bought diesel because of status - hey, I'm driving diesel, which shows I am smart. The VW scandal blew up the status argument: only chumps buy diesel.

"The Volkswagen scandal raised doubts about the fuel efficiency advantage "

rayward, the scandal wasn't about fuel efficiency directly. It was about cheating on the environmental emissions tests. Primarily to maintain high horse power via running in a higher polluting mode when not being tested.

The obvious problem with this study is that Mercedes-Benz has its own emissions scandal going on. How do they distinguish the direct effects of that issue from the collective effect of VW's issues?

But maybe clockwork_prior could enlighten us on why Germans are such lying liars? They clearly need to be less German and more American, I'm sure he'd agree as that what the evidence indicates.

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