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

Using a field experiment involving undercover visits to auto repair garages with a test vehicle, I first examine how asymmetric information between mechanics and motorists over auto repair service quality affects outcomes. I then examine whether reputation mitigates these problems via a matched-pair treatment in which undercover researchers appeared as either one-time or repeat-business customers. The results indicate that under and overtreatment are widespread, and that reputation via a repeat business mechanism does not improve outcomes significantly.