So I asked Google's Gary Illyes on Friday if Panda (the content based quality algorithm) demotes or devalues and Gary said it does adjust rankings of pages, which is unlike Penguin which just ignores (devalues) the bad links.
@methode does Panda devalue, demote or both?— Barry Schwartz (@rustybrick) October 7, 2016
Here is Gary's response:
@rustybrick anyway, panda adjusts ranking of pages based on quality of the site.— Gary Illyes (@methode) October 7, 2016
He was careful in his response, but I did later get him to go on record that this means more like demote than devalue. I'll share that shortly.
In addition, John Mueller was asked about this in the Friday hangout and he said "I don't have any specific answer for that." He then goes onto non Panda related algorithms on how they do that, for example with keyword stuffing. Here is the video embed:
I don't think this is a surprise to anyone but getting it clear for SEOs and webmasters is helpful.
Forum discussion at Twitter.