Prof. Henry Schneider

Henry Schneider, an assistant professor of economics at Cornell University's Johnson School of Management, calls this the "expert service dilemma," and in recent research he set out to take a closer look at the phenomenon.Specifically, he wanted to see what effect the possibility for repeat business had on the accuracy of diagnoses.

Posing as an unwitting motorist in need of car repair, Schneider took the same car, with the same problems, to 40 different auto mechanics.In some instances, he presented himself as someone who had just moved to the area - and so, presumably, someone who would represent potential repeat business.In other instances, he told mechanics that he would soon be moving away.In each instance, the problems with the car were relatively easy to spot and repair: a loose battery cable, low engine coolant, and a blown taillight.

What did he discover?In 27 percent of cases, overtreatment ensued.That is, the mechanics diagnosed problems that weren't present and repairs that weren't necessary.In 77 percent of cases, undertreatment was the problem.Because two of the three issues with the car were relatively inexpensive to fix, Schneider hypothesized, many mechanics didn't take the time to look for them.

The major finding was that reputation incentives - including the possibility of repeat business - did not seem to influence the accuracy of diagnosis."The prevalence of under and overtreating, even when repeat business is possible, suggests that motorists are typically unable to detect its presence and indicates that diagnoses may be highly unreliable," Schneider said.

Henry Schneider, an economist at Cornell University, believes that auto mechanics are no more dishonest than the rest of us.His opinion is something of a surprise in light of his research.In a new paper, Schneider describes data from [ ... ]

Henry Schneider, an economist at Cornell University, believes that auto mechanics are no more dishonest than the rest of us.His opinion is something of a surprise in light of his research.

In a new paper, Schneider describes data from undercover visits to Canadian garages, which show that 61 per cent of the total sum spent on car repairs was completely unnecessary.Repeating the undercover experiment in the United States, he found the same thing: an industry characterized by systemic rip-offs where concern for reputation had little effect on service.

Read more in the Toronto Star

In a recent New York Times column, David Leonhardt discussed an interesting research project conducted by Henry Schneider, an assistant professor at Cornell's business school.
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For his Ph.D. dissertation, Henry loosened his Suburu's battery cable (which makes it hard to start the car) and sucked out coolant (which can result in the engine overheating).Next, he took his car to 40 garages and asked them to undertake a thorough inspection.His results are interesting: 27 garages informed him about the loose cable, 11 told him about the low coolant, and 10 tried to sell unnecessary repairs (ranging from a new battery to a new starter motor).Overall, Professor Schneider found that only 20% of garages in his sample did a good job of evaluating his car.

I'm curious if you are surprised with these results.80% were either dishonest or incompetent.I would have thought there were more honest and competent service providers.

Mr. Schneider's field research empirically proves a theorem that we all know: buyer beware.
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This under recognized result of Mr. Schneider's paper deserves attention: low profit potential jobs receive shoddy service.

So where should you take your car to be serviced?First, I'd enquire if mechanics are compensated on commission - a 1992 Arizona Republic article claims that 95% of all mechanics work on some type of commission system (which is surprising).And of course, take your car to a shop that has been recognized as "the best of" in your city.For his next study, it'd be fascinating for Mr. Schneider to replicate his experiment at repair shops that have won a city's "best of" awards.

In a recent New York Times column, David Leonhardt discussed an interesting research project conducted by Henry Schneider, an assistant professor at Cornell's business school.
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For his Ph.D. dissertation, Henry loosened his Suburu's battery cable (which makes it hard to start the car) and sucked out coolant (which can result in the engine overheating).Next, he took his car to 40 garages and asked them to undertake a thorough inspection.His results are interesting: 27 garages ... http://www.pricingforprofit.com/blog/blog-view.php?blogid=155 16 Dec 2007 00:00:00 GMT

Leonhardt discusses the research of Cornell University economist Henry Schneider, in which Schneider conducted an experiment to see how accurately auto repair shops diagnosed problems with customers' cars.
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Only 20% of repair shops warranted a passing grade, according to Professor Schneider.
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What do our findings mean in light of Professor Schneider's research?
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Perhaps that's a new research path for experimental economists like Professor Schneider.

The Toronto Star recently reported on a study by Henry Schneider, an economist at Cornell University, who made undercover visits to several mechanics with a car that had known defects. He found that 61% of the money spent on repairs was unnecessary. As an economist, he didn't make any moral judgements on his findings. He merely concluded that the mechanics were responding to economic incentives and exploiting the market power their knowledge monopoly gave them.