Measuring the surplus of superficiality: the case of dented bumper repair

Abstract

This article uses data from a survey administered to 400 automobile owners in northern Utah to estimate willingness-to-pay (WTP) for removal of a superficial dent in the bumper of a typical owner’s vehicle. A unique set of controls are used to estimate the determinants of WTP for this particular manifestation of superficiality. Both parametric and nonparametric measures of mean WTP are also derived. To the extent that a driver’s demand for superficiality represents a market failure, e.g., due to imperfect information, or, in a normative sense, the influence of wasteful social norms, our welfare measures represent estimates of the potential social deadweight loss associated with the purchase of this particular good. In this case, potential social deadweight loss is defined as total surplus from the market for dented-bumper repair that remains ‘untransferred’ to markets for non-(or less)superficial goods. Best-guess estimates of the annual potential deadweight loss from dented-bumper repair in the US fall in the range of $122 000 to $609 000, depending upon the estimated number of superficially dented bumpers per year.

Keywords:

• superficiality
• willingness-to-pay
• deadweight loss

JEL Classification:

• C2
• Z1

Notes

¹ The full text of the WTP question accompanying the photograph reads, ‘Please begin this survey by viewing the photograph of the dented bumper. Note that only the bumper has been dented. Nothing else about the vehicle has been affected. Now, suppose when you return to your own car in the parking lot outside this building, you notice a dent has been left on its bumper, identical to the one you’ve just viewed in the photograph. You immediately file a claim with your auto insurance company for the damage to your bumper and the company sends you a check (made out to you) for $XX, which is exactly the amount needed to repair the dent. The insurance company informs you that you are not required to use the money to fix the dent – you can spend it however you wish, no questions asked. Which statement below do you think best describes what you will choose to do with the money? (If you did not drive your car to this building this morning/afternoon, please think of the car you normally drive for commuting purposes around town.)’

² Our response rate is slightly lower than the typical, or average, rate for these types of surveys (de Leeuw, 1992).

³ The survey instrument is available upon request from the author.

⁴ Output for the censored logit regression estimated in Stata/IC 11.0 for Windows (32 bit), as well as for the parametric and Turnbull mean WTP estimates, is available upon request from the author.

⁵ The upper-bound Turnbull estimate of mean WTP is approximately $1307, which is very close to our parametric estimate.