Consumer Choice and Corporate Bankruptcy Study 3

Our interventions involve randomly providing participants with different news articles about a firm, some of which include information about the firm's bankruptcy status.

2023-09-11

2023-12-31

Our key outcome variable is the willingness to pay for a product of a firm that is in Chapter 11 bankruptcy. We measure how this depends on an endogenous variable: awareness that the firm is in Chapter 11 bankruptcy. Our experimental design introduces exogenous variation in this awareness.

In our price-list mechanism, each participant is asked a series of questions. Each question asks the participant to choose between a product of one firm, B, and a cash equivalent X. The product of firm B is constant while the value X of the cash equivalent increases across questions. The willingness to pay for firm B's product is constructed as the highest value X such that the participant prefers firm B's product over the cash equivalent worth X.

We measure whether each participant is aware that firm B is currently in Chapter 11 bankruptcy. Our interventions introduce information about firm B's bankruptcy.

We also measure how many participants were already aware that the firm was in bankruptcy by asking participants to note which firms in a list are currently in bankruptcy.

We identify each participant's willingness to pay for a product of a bankrupt firm. We measure how that willingness to pay changes when we exogenously introduce information about the bankrupt firm. Our analysis will look similar to our earlier experiment related to the Hertz bankruptcy.

We implement our experiment using a Qualtrics survey. Qualtrics offers a computerized randomization procedure, which we use.

We randomize at the participant level.

No

We plan on having 900 participants. We exclude participants that fail comprehension checks or whose price-list responses indicate nonmonotonic responses. We will thus likely end up with fewer than 900 observations. For robustness, we will also estimate some regressions on the subsample of individuals that do not already own the lottery-prize product.

We expect to start with 900 participants. We exclude participants that fail comprehension checks or whose price-list responses indicate nonmonotonic responses. We will thus likely end up with fewer than 900 observations. For robustness, we will also estimate some regressions on the subsample of individuals that do not already own the lottery-prize product.

We will have three groups, two treatment groups and one control. One treatment group will be informed of the firm's bankruptcy status. The second treatment group will also be informed of the firm's bankruptcy status, but we will also add information about the firm's debtor-in-possession financing loan. We aim to start with 300 in each group. However, due to the randomization process and dropping participants that fail comprehension checks or whose price-list responses indicate nonmonotonic responses, we will likely end up with fewer than 900 observations.