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Agency Problems and Reputation in Expert Services: Evidence from Auto RepairHenry S. SchneiderCornell 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 working papers seriesDate posted: October 17, 2007 ; Last revised: February 18, 2010Suggested CitationContact Information
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