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Agency Problems and Reputation in Expert Services: Evidence from Auto Repair


Henry S. Schneider


Cornell University - S.C. Johnson Graduate School of Management

December 21, 2009

Johnson School Research Paper Series No. 15-07

Abstract:     
I investigate the nature of agency problems in the auto repair market and the ability of reputation to limit them by examining data on 40 undercover garage visits I collected during a field experiment and 51 undercover garages visits provided by a public-interest group. I document clear patterns of agency problems and estimate that the resulting welfare loss represents a substantial fraction of industry revenue. I find no evidence, however, that a mechanic's concern for her reputation improves service quality or limits inefficiencies. I conclude by drawing inferences to expert services more generally and discussing possible remedies.

Number of Pages in PDF File: 42

Keywords: Reputation, Asymmetric Information, Field Experiments, Expert Services

JEL Classification: D82, L14, L15

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Date posted: October 17, 2007 ; Last revised: February 18, 2010

Suggested Citation

Schneider, Henry S., Agency Problems and Reputation in Expert Services: Evidence from Auto Repair (December 21, 2009). Johnson School Research Paper Series No. 15-07. Available at SSRN: http://ssrn.com/abstract=1022204 or http://dx.doi.org/10.2139/ssrn.1022204

Contact Information

Henry S. Schneider (Contact Author)
Cornell University - S.C. Johnson Graduate School of Management ( email )
Ithaca, NY 14853
United States
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