How Do Influenced Recalls Have Lower Vehicle Owners’ Correction Rates?
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This paper investigates why influenced recalls have lower consumers’ correction rates. Risk from vehicle defects positively affects correction rates, while recall initiation negatively affects them. Furthermore, the risks directly affect the correction rates and indirectly affect them via recall initiation. For our analysis, we use linear regression and probit models to obtain consistent estimators of interest. We find that recalls with riskier defects raise the correction rates, particularly if the consumer recall notification letter contains an alerting expression such as “death,” whereupon the correction rate increases by 10%. We also find that the government often initiates more hazardous recalls. Those influenced recalls are negatively associated with the correction rate because vehicle owners often delay repairs, or their vehicles’ defects are revealed after a long time.
Abstract
This paper investigates why influenced recalls have lower consumers’ correction rates. Risk from vehicle defects positively affects correction rates, while recall initiation negatively affects them. Furthermore, the risks directly affect the correction rates and indirectly affect them via recall initiation. For our analysis, we use linear regression and probit models to obtain consistent estimators of interest. We find that recalls with riskier defects raise the correction rates, particularly if the consumer recall notification letter contains an alerting expression such as “death,” whereupon the correction rate increases by 10%. We also find that the government often initiates more hazardous recalls. Those influenced recalls are negatively associated with the correction rate because vehicle owners often delay repairs, or their vehicles’ defects are revealed after a long time.
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