DP12899 The Impact of Environmental Fraud on the Used Car Market: Evidence from Dieselgate

Author(s): Itai Ater, Nir Yosef
Publication Date: April 2018
Date Revised: November 2020
Keyword(s): Durable goods, fraud, Product recall, reputation, secondary markets, Vehicles
JEL(s): D12, D80, L14, L62
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=12899

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-inâ??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.