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Asymmetric Information: Car Trouble
By Chris | November 8, 2007
This past summer, I drove to Mt. Rainier to visit my sister who was working at the gift shop there. Outside of Puyallup, WA my car wouldn’t start. I took it to Sears and they informed me that I had a bad starter. They replaced the starter. It still wouldn’t start. Two days, an alternator, and battery later I was back on the road.
My Explorer made it 1500 miles across the country to my university before running into more problems. The first mechanic I took it to told me that I needed to replace both of my tie rods, my upper left ball joint, my front brakes and then get an alignment. The estimate came to over 600 dollars. I balked at the price. A fellow graduate student recommended another mechanic who charged less for parts and fixed my Explorer for less than 250 dollars.
I am pretty ignorant when it comes to cars. I can change my oil, replace a flat and that’s about it. If you’re like me, you’ve probably had experience with mechanics using asymmetric information to maximize their utility. But how widespread is the problem? As a graduate student, Henry Schneider, decided to find out. He disconnected the battery cable and drained some coolant from his Suburu before taking it to 40 different garages.
“Ten of the garages, meanwhile, recommended costly repairs that were plainly unnecessary, like replacing the starter motor or the battery.”
It looks like I’m not the only one out there replacing perfectly good starters. The cost is sunk, but its nice to know that I’m not alone in my naivety.
Topics: Economics | 1 Comment »
November 11th, 2007 at 11:55 pm
The mechanics here are like the real-state agents (in Freakconomics), they are experts who use their information to our detriment. Moral issue aside, the extra money they charge may be a reasonable part of return of the work they did for getting the information we do not have. If we do not want to pay it, we could choose to know more about repairing cars or the market of real state, but instead of money, we pay by our time, and related opportunity cost.