Economics of repair centers 1

In a previous post, wrote about a common camera repair horror story.

I just received the Sony DSC-T9 back from repair. It is still broken in exact same
way as when I sent it in. Power off, power on, and it asks to set
date and time again. Since it’s the fourth time in 90 days the unit
has been in repair w/o success, the customer service rep. suggested
that they request their Sony liason to get a replacement from
Sony. No guarantee that that it would be approved by Sony, but I
guess a case could be made.

There are no other authorized (i.e. where Sony pays) service centers for
Sony cameras. The Laredo, TX center is for the higher end cameras.
So really, the only option is to continue riding this roller coaster
until the ride stops.

The only positive is that I might get a “new” camera out of it. The
only consolation is that each time I send camera in for repair, Sony
is being charged for the shipping and service. Kind of like death
by a thousand pin pricks.

In a way, the economics of out-sourced repair under warranty looks funny to me — perhaps the economists in the audience have a term for it?

The repair cost is paid by the manufacturer, but actual work and quality is under the control of the out-sourced center. The manufacturer cannot verify whether work is completed correctly (or at all), but they still pay for the work to be done. The out-source (if it’s a sole out-source) gets the business regardless of whether the customer is happy or not — it’s “free” to the customer other than their time to package and return the product. An unscrupulous out-source might even do low quality work to cause multiple repairs to happen. The perverse incentive (is that the appropriate term?) is that the lower quality of work, the more revenue from repeat repairs, so low quality is rewarded.

Similar reasoning can be applied to extended warranties using third party repair people.

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  • Gumby

    [markup=]>perhaps the economists in the audience have a term for it?
    possibly “agency problem”.