Consumer Choice and Corporate Bankruptcy

87 Pages Posted: 8 Jul 2021 Last revised: 17 May 2023

See all articles by Samuel Antill

Samuel Antill

Harvard Business School

Megan Hunter

Boston College - Carroll School of Management

Date Written: May 17, 2023


We estimate the indirect costs of corporate bankruptcy associated with lost customers. In incentivized experiments, randomly informing consumers about a firm’s Chapter 11 reorganization lowers their willingness to pay for the firm’s products by 18-35%. Up to 48% of consumers are aware of major bankruptcies. Using our experiments to estimate a structural model, we show that a Chapter 11 bankruptcy causally reduces a firm’s value by 10-31%, depending on the industry, through lost customers. We show that these costs are unlikely to arise before bankruptcy. Our results provide novel support for the tradeoff theory, a pillar of corporate finance.

Keywords: Consumer choice, bankruptcy, financial distress, structural estimation, experimental economics, Hertz

JEL Classification: D12, L15, G33

Suggested Citation

Antill, Samuel and Hunter, Megan, Consumer Choice and Corporate Bankruptcy (May 17, 2023). Available at SSRN: or

Samuel Antill (Contact Author)

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Megan Hunter

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

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