This setting lets you change the way you view articles. You can choose to have articles open in a dialog window, a new tab, or directly in the same window.
Open in Dialog
Open in New Tab
Open in same window

American Economic Review: Vol. 101 No. 3 (May 2011)

Expand

Quick Tools:

Print Article Summary
Export Citation
Sign up for Email Alerts Follow us on Twitter

Explore:

AER - All Issues

AER Forthcoming Articles

Is an Automaker's Road to Bankruptcy Paved with Customers' Beliefs?

Article Citation

Hortaçsu, Ali, Gregor Matvos, Chaehee Shin, Chad Syverson, and Sriram Venkataraman. 2011. "Is an Automaker's Road to Bankruptcy Paved with Customers' Beliefs?" American Economic Review, 101(3): 93-97.

DOI: 10.1257/aer.101.3.93

Abstract

We explore the role the feedback loop between firms' financial health and consumers' demand for their products plays in the auto market. We construct a simple model of an automaker making pricing and debt service (continuation) decisions while recognizing that consumers are sensitive to whether it stays in business. We show that multiple equilibria can exist in such a model, and calibrate it to match stylized facts surrounding GM's recent bankruptcy. The results suggest that while the impact of financial distress on demand substantially reduced GM's profit, bank-run-like multiple equilibria do not appear likely in this market.

Article Full-Text Access

Full-text Article

Additional Materials

Online Appendix (204.50 KB)

Authors

Hortaçsu, Ali (U Chicago)
Matvos, Gregor (U Chicago)
Shin, Chaehee (U Chicago)
Syverson, Chad (U Chicago)
Venkataraman, Sriram (Emory U)

JEL Classifications

D12: Consumer Economics: Empirical Analysis
G32: Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure
G33: Bankruptcy; Liquidation
L25: Firm Performance: Size, Diversification, and Scope
L62: Automobiles; Other Transportation Equipment


American Economic Review


Quick Tools:

Sign up for Email Alerts

Follow us on Twitter

Subscription Information
(Institutional Administrator Access)

Explore:

AER - All Issues

AER - Forthcoming Articles

Virtual Field Journals


AEA Member Login:


AEAweb | AEA Journals | Contact Us