(The) impact of celebrity controversies on price premiums in the resale market

Abstract

We address how Kanye West’s negative scandal would have an impact on the Yeezy Boost products’ price premium. The price premium is a good measure to track the consumers’ preference towards the brand. For the methodology, we use the difference-in-differences to see the change in the price premium when the repeated scandal and apology occur. Before using difference-in-differences, I used propensity score matching (PSM) to match each control group to treatment groups. We handled two big Kanye West scandals that happened in a short period of time and apologized for two previous controversies. These events are seen as shocks in difference-in-differences methods and cause a change in the price premium. The price premium after the apology has been shown to be relatively lower than before, and the second controversy has had a more negative price premium compared to the first controversy. It appears that the inappropriate apology at the wrong time worsens the brand image.