We examine how consumers react to the financial distress of durable goods manufacturers by studying the Swedish new car market. We employ a difference-in-differences matching methodology whereby we compare sales of carmaker Saab with those of a control group of substitute products. To account for possible substitution between products in the treatment and control groups, we propose and apply bounds to our difference-in-differences matching estimator. We then refine the bounds and provide conditions under which they depend only on product elasticities. We find that there was a significant decrease in the sales of Saab following its filing for administration.
Reference:
Huse, Christian and Nikita Koptyug (2017),
"Bailing on the Car That Was Not Bailed Out: Bounding Consumer Reactions to Financial Distress".
Journal of Economics & Management Strategy
26(2),
337–374.