A punishment shared is a punishment halved: Concurrent recalls reduce products’ market share loss

Abstract

AbstractManufacturers often recall defective products. When this occurs, multiple recalls of defective products can be announced in the same statement or separate statements (i.e., concurrent vs. separate recalls). We draw upon the attribution theory to study whether and how concurrent (vs. separate) recalls of multiple products affect each recalled product's market share loss. In this study, a unique dataset of product recalls in the Chinese automobile industry and two experiments reveal that when products are concurrently (vs. separately) recalled, each product's defect is perceived as less distinctive, thus assuaging the market share loss for the focal product. In addition, the mitigating effect of concurrent recalls is stronger when the focal product is recalled with many (vs. few) other products but weaker for products with high price premiums and those with a recall history. These insights suggest that manufacturers can strategically use concurrent recalls to minimize market share loss resulting from product recalls, particularly when dealing with lower‐priced products or those with a limited recall history.