Bailing on the Car that Was Not Bailed Out: Bounding Consumer Reactions to Financial Distress

38 Pages Posted: 25 May 2017

See all articles by Cristian Huse

Cristian Huse

Stockholm School of Economics; Swedish House of Finance

Nikita Koptyug

Research Institute of Industrial Economics (IFN)

Date Written: Summer 2017

Abstract

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.

Suggested Citation

Huse, Cristian and Koptyug, Nikita, Bailing on the Car that Was Not Bailed Out: Bounding Consumer Reactions to Financial Distress (Summer 2017). Journal of Economics & Management Strategy, Vol. 26, Issue 2, pp. 337-374, 2017, Available at SSRN: https://ssrn.com/abstract=2972940 or http://dx.doi.org/10.1111/jems.12184

Cristian Huse (Contact Author)

Stockholm School of Economics ( email )

PO Box 6501
Stockholm, 11383
Sweden

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

Nikita Koptyug

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

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