Working Paper No. 1093

Bailing on the Car that Wasn't Bailed out: Bounding Consumer Reactions to Financial Distress

Published: November 10, 2015Pages: 57Keywords: Administration, Automobiles, Bankruptcy effects; Brand loyalty, Bounds; Consumer reaction; Consumer response; Difference-in-differences; Durable goods; Financial distress; Treatment effectsJEL-codes: C21; D12; D22; G32; G33; L62
Published version

Bailing on the Car that Wasn't Bailed out: Bounding Consumer Reactions to Financial Distress Cristian Huse and Nikita Koptyug


This paper examines how consumers react to the financial distress of durable goods manufacturers by looking at the Swedish new car market. We employ a difference-in-differences matching methodology whereby we compare sales of carmaker Saab with those of a carefully constructed 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 the products' own- and cross-price elasticities. We find that even accounting for potential substitution, there was a significant decrease in the sales of Saab following its filing for administration. These findings are robust to a number of robustness checks and alternative hypothesis.

Nikita Koptyug

Contact

Ph: +46 8 665 45 82
nikita.koptyug@ifn.se

Interdisciplinary European Studies

The European Union in a Changing World Order

Pages-from-2019-Oxelheim-m.gif

This book explores how the European Union responds to the ongoing challenges to the liberal international order. These challenges arise both within the EU itself and beyond its borders, and put into question the values of free trade and liberal democracy. 

About the book

Events

Seminars organized by IFN

 

To present ongoing research informal brown-bag seminars are held on Mondays at 11:30 am. This is an opportunity for IFN researchers to test ideas and results.

Academically oriented seminars are most of the time held on Wednesdays at 10 am. At these events researchers from IFN and other institutions present their research.

In addition, IFN organizes seminars open to the public. Topics for these are derived from the IFN research.

Research Institute of Industrial Economics, Grevgatan 34 - 2 fl, Box 55665, SE-102 15 Stockholm, Sweden | Phone: +46-(0)8-665 45 00 | info@ifn.se