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Willingness to Pay for Brand Reputation: Lessons from the Volkswagen Diesel Emissions Scandal

Che, X., Katayama, H. and Lee, P. (2020). Willingness to Pay for Brand Reputation: Lessons from the Volkswagen Diesel Emissions Scandal (20/02). London, UK: City, University of London.

Abstract

In this study, we use the announcement of the Volkswagen emissions scandalon September 18, 2015, as an exogenous shock to measure consumers’ willing-ness to pay (WTP) for brand reputation. Only Volkswagen diesel cars producedin2009-2015were announced as emissions violators. Using eBay car auction data,we estimate the impacts of the scandal on the prices of Volkswagen emissionsnon-violatingcars. Our difference-in-differences estimates show that final bid prices decreased by 14% and 9% in diesel and gasoline car markets, respectively, whichpurely reflected a decline in consumers’ WTP for Volkswagen’s brand reputation.Additionally, the difference in price-drops between the violating and non-violating diesel cars is statistically insignificant. This may be due to the fact that consumers rationally adjust their WTP by expecting compensation which will almost surely be provided by Volkswagen for violating models.

Publication Type: Monograph (Discussion Paper)
Additional Information: © The Authors
Publisher Keywords: Volkswagen emissions scandal, willingness to pay, brand reputation
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HC Economic History and Conditions
T Technology > TL Motor vehicles. Aeronautics. Astronautics
Departments: School of Arts & Social Sciences > Economics
School of Arts & Social Sciences > Economics > Discussion Paper Series
URI: https://openaccess.city.ac.uk/id/eprint/23486
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