  The disclosure of the VW emission manipulation scandal caused a
quasi-experimental market shock to the observable environmental quality of VW
diesel vehicles. To investigate the market reaction to this shock, we collect
data from a used-car online advertisement platform. We find that the supply of
used VW diesel vehicles increases after the VW emission scandal. The positive
supply side effects increase with the probability of manipulation. Furthermore,
we find negative impacts on the asking prices of used cars subject to a high
probability of manipulation. We rationalize these findings with a model for
sorting by the environmental quality of used cars.
