Ascensión Andina-Díaz, Javier Campos, Juan-Luis Jiménez, Jordi Perdiguero
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Abstract
This paper contributes to the literature on how firms change their advertising strategies after a corporate scandal by providing both a theoretical model and an empirical evaluation based on the idea that advertising acts as a signal of the product quality that is modulated by the number of competing substitutes in the market. This result is new to the literature and helps to explain cases in which, possibly counter-intuitively, a firm affected by a corporate scandal may optimally decide to reduce its advertising expenditures, rather than increase it, in an attempt to restore its reputation as quickly as possible. We find empirical support for this result in the Volkswagen Group's response to the Dieselgate scandal.
期刊介绍：
The Manchester School was first published more than seventy years ago and has become a distinguished, internationally recognised, general economics journal. The Manchester School publishes high-quality research covering all areas of the economics discipline, although the editors particularly encourage original contributions, or authoritative surveys, in the fields of microeconomics (including industrial organisation and game theory), macroeconomics, econometrics (both theory and applied) and labour economics.
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