Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/129648 
Year of Publication: 
2015
Series/Report no.: 
IFN Working Paper No. 1093
Publisher: 
Research Institute of Industrial Economics (IFN), Stockholm
Abstract: 
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.
Subjects: 
Administration
Automobiles
Bankruptcy effects
Brand loyalty
Bounds
Consumer reaction
Consumer response
Difference-in-differences
Durable goods
Financial distress
Treatment effects
JEL: 
C21
D12
D22
G32
G33
L62
Document Type: 
Working Paper

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