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Market-Based Solutions to Vital Economic Issues
Research
Mar 17, 2018

Boycott and Demand Spillovers Related to Country-of-Origin: The Automobile Market in China

Abstract

Consumer boycotts of products offer a unique context to understand the nature of consumer preferences and market dynamics. We focus on the 2012 nationwide boycott of Japanese products in China triggered by a territorial dispute and heavily influenced by historical animosity between citizens of the two countries. In contrast to prior research, which examines the impact of boycotts only on products from the boycotted country, we investigate the impact of boycotts on sales of products from different countries. We also study several moderators (i.e., product quality, consumer groups, and time horizon) for the effect of boycott on demand for these products. Based on detailed automobile sales data from 2008 to 2013, our analysis shows that the boycott dramatically reduced the market share of Japanese vehicle brands by nearly 60 percent, while increasing the share of Chinese vehicles by approximately 5 percent. Among non-boycotted countries, the boycott increased the demand for U.S. vehicles but decreased demand for the other non-boycotted foreign vehicles. Moreover, although product quality did not moderate the boycott’s impact on Japanese vehicle brands, higher quality vehicles from both the home country and non-boycotted foreign countries benefitted more (or were less affected) during the boycott. Besides, we find substantial heterogeneity in the impacts of boycott across different cities in China that have different demographic characteristics, levels of media exposure, and historical relationships with Japan. Finally, the sales impact on Japanese vehicles persisted for more than a year, revealing more persistent effects than those reported in previous studies where the products studied are low-value, non-durable goods.

Note: Research papers posted on SSRN, including any findings, may differ from the final version chosen for publication in academic journals.


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