Revealing the NHTSA nudge: Education and transparency in automotive recall decisions

When an automotive manufacturer recalls a defective vehicle, federal law requires the manufacturer to send a recall notification letter to affected consumers using standardized language. Regardless of whether the recall was initiated voluntarily by the manufacturer or due to pressure from the National Highway Traffic Safety Administration (NHTSA), these recall letters imply that the manufacturer acted proactively to protect consumer safety, although this is not always accurate. We refer to the hidden regulatory influence applied by NHTSA in pressuring firms to recall as the NHTSA nudge . Recall letters also obscure the time the manufacturer took to decide to recall. We conduct three experimental studies with over 2,200 participants to examine how educating the consumer on the recall decision-making process and providing transparency about recall initiator and timing influences consumer purchase intention. We find that, once consumers are informed about the NHTSA nudge, purchase intention is higher for manufacturer-initiated recalls than for NHTSA-initiated recalls. It is also higher for faster recall decisions than for slower ones. However, the recall timing effect dissipates when NHTSA nudges. Mechanism analyses show that consumers perceive manufacturers to be of lower quality when recalls occur due to pressure from NHTSA compared to when the manufacturer acts on their own volition. Further, these lower quality perceptions partially explain the reduction in purchase intention. This study contributes to the literature on recall decision-making and operational transparency and offers practical implications for NHTSA and automotive manufacturers. *