This paper uses the 2015 Volkswagen emissions scandal as a natural experiment to provide
evidence that collective reputation externalities matter for firms. We find that the Volkswagen
scandal reduced the US sales of the other German auto manufacturers—BMW, Mercedes-
Benz, and Smart—by about 105,000 vehicles worth $5.2 billion. The decline was principally
driven by an adverse reputation spillover, which was reinforced by consumer substitution
away from diesel vehicles and was partially offset by substitution away from Volkswagen …

This paper uses the 2015 Volkswagen (VW) emissions scandal as a natural experiment to
provide evidence that collective reputation externalities are economically significant. Using a
combination of difference-in-differences and demand estimation approaches, we document
a spillover effect from the scandal to the non-VW German auto manufacturers. The spillover
amounts to an average drop of $2,057 in consumer valuations of these manufacturers'
vehicles and a 34.6% reduction in their annual sales. We substantiate our interpretation that …