Sorting in the used-car market after the Volkswagen emission scandal
Anthony Strittmatter, Michael Lechner
Abstract
The disclosure of the VW emission manipulation scandal caused a quasi-experimental market shock to the observable environmental quality of VW diesel vehicles. To investigate the impact of environmental quality on the market, we collect data from a used-car online advertisement platform. We find that the supply of used VW diesel vehicles increases after the VW emission scandal. The positive supply effects increase with the probability of manipulation. Furthermore, we find negative impacts on the asking prices of used cars subject to a high probability of manipulation. We rationalize these findings with a model for sorting by the environmental quality of used cars.
Topics & Concepts
SortingDiesel fuelShock (circulatory)Quality (philosophy)BusinessEconomicsMicroeconomicsAdvertisingEnvironmental qualityIndustrial organizationSupply sideEnvironmental economicsExternalityEnvironmental policySupply chainObservableEconometricsProduction (economics)Willingness to payMarketingAuto industryEnergy, Environment, and Transportation PoliciesConsumer Market Behavior and PricingEnergy, Environment, Economic Growth