Product Recalls and Firm Reputation

• 成果类型: Article
• 署名作者: Jovanovic, Boyan
• 署名单位: New York University
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MICROECONOMICS
• ISSN/ISSBN: 1945-7669
• 发表日期: 2021
• 页码: 404-442
• 关键词: starting small; INFORMATION; IMPACT; liability; WEALTH; price

摘要

Product recall data and information on stock price reactions to recalls are used to estimate the value of reputation in a model in which product quality is not contractible. A recall is the result of a product defect that signals low effort. The recall triggers a reduction in the firm's product price and value, which then both rise steadily until its next defect occurs. We estimate that reputation accounts for 8.3 percent of firm value and that welfare is 26 percent of its first best level. A policy intervention that attains first best is a recall tax accompanied by a flow subsidy.