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# Ch. 4-demand-estimation(2)

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Microeconomics-Salvatore

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### Ch. 4-demand-estimation(2)

1. 1.
2. 2.
3. 3. Marketing Research Approaches to Demand Estimation<br />Consumer Surveys<br />data from survey questions<br />Observational Research<br />data from observed behavior<br />Consumer Clinics<br />data from laboratory experiments<br />Market Experiments<br />data from real market tests<br />
4. 4.
5. 5.
6. 6. Scatter Diagram<br />Regression Analysis<br />
7. 7.
8. 8. Regression Analysis<br />Regression Line: Line of Best Fit<br />Regression Line: Minimizes the sum of the squared vertical deviations (et) of each point from the regression line.<br />Ordinary Least Squares (OLS) Method<br />
9. 9.
10. 10. Ordinary Least Squares (OLS)<br />Model:<br />
11. 11. Ordinary Least Squares (OLS)<br />Objective: Determine the slope and intercept that minimize the sum of the squared errors.<br />
12. 12. Ordinary Least Squares (OLS)<br />Estimation Procedure <br />
13. 13. Ordinary Least Squares (OLS)<br />Estimation Example <br />
14. 14. Ordinary Least Squares (OLS)<br />Estimation Example <br />
15. 15. Tests of Significance<br />Standard Error of the Slope Estimate<br />
16. 16. Tests of Significance<br />Example Calculation<br />
17. 17. Tests of Significance<br />Example Calculation<br />
18. 18. Tests of Significance<br />Calculation of the t Statistic<br />Degrees of Freedom = (n-k) = (10-2) = 8<br />Critical Value at 5% level =2.306 <br />
19. 19. Tests of Significance<br />Decomposition of Sum of Squares<br />Total Variation = Explained Variation + Unexplained Variation<br />
20. 20.
21. 21. Tests of Significance<br />Coefficient of Determination<br />
22. 22.
23. 23. Tests of Significance<br />Coefficient of Correlation<br />
24. 24. Multiple Regression Analysis<br />Model:<br />
25. 25.
26. 26.
27. 27. Multiple Regression Analysis<br />Adjusted Coefficient of Determination <br />
28. 28. Multiple Regression Analysis<br />Analysis of Variance and F Statistic<br />
29. 29. Problems in Regression Analysis<br />Multicollinearity: Two or more explanatory variables are highly correlated.<br />Heteroskedasticity: Variance of error term is not independent of the Y variable.<br />Autocorrelation: Consecutive error terms are correlated.<br />
30. 30.
31. 31. Durbin-Watson Statistic<br />Test for Autocorrelation<br />If d = 2, autocorrelation is absent.<br />
32. 32. Steps in Demand Estimation<br />Model Specification: Identify Variables<br />Collect Data<br />Specify Functional Form<br />Estimate Function<br />Test the Results<br />
33. 33. Functional Form Specifications<br />Linear Function:<br />Power Function:<br />Estimation Format:<br />
34. 34.
35. 35.
36. 36. Chapter 4 Appendix<br />
37. 37.
38. 38.
39. 39.
40. 40. Getting Started<br />Install the Analysis ToolPak add-in from the Excel installation media if it has not already been installed<br />Attach the Analysis ToolPak add-in<br />From the menu, select Tools and then Add-Ins...<br />When the Add-Ins dialog appears, select Analysis ToolPak and then click OK.<br />
41. 41.
42. 42. Entering Data<br />Data on each variable must be entered in a separate column<br />Label the top of each column with a symbol or brief description to identify the variable<br />Multiple regression analysis requires that all data on independent variables be in adjacent columns<br />
43. 43. Example Data<br />
44. 44. Running the Regression<br />Select the Regression tool from the Analysis ToolPak dialog<br />From the menu, select Tools and then Data Analysis...<br />On the Data Analysis dialog, scroll down the list of Analysis Tools, select Regression, and then click OK<br />The Regression tool dialog will then be displayed<br />
45. 45.
46. 46.
47. 47. Select the Data Ranges<br />Type in the data range for the Y variable or select the range on the worksheet<br />Type in the data range for the X variable(s) or select the range on the worksheet<br />If your ranges include the data labels (recommended) then check the labels option<br />
48. 48.
49. 49. Select an Output Option<br />Output to a selected range<br />Selection is the upper left corner of the output range<br />Output to a new worksheet<br />Optionally enter a name for the worksheet<br />Output to a new workbook<br />And then click OK<br />
50. 50.
51. 51. Regression Output<br />
52. 52. Multiple Regression Data<br />
53. 53.
54. 54. Regression Output<br />