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Managerial Economics in a Global Economy, 5th Edition by Dominick Salvatore

Managerial Economics in a Global Economy, 5th Edition by Dominick Salvatore. Chapter 4 Demand Estimation. The Identification Problem. Demand Estimation: Marketing Research Approaches. Consumer Surveys Observational Research Consumer Clinics Market Experiments. Scatter Diagram.

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Managerial Economics in a Global Economy, 5th Edition by Dominick Salvatore

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  1. Managerial Economics in a Global Economy, 5th EditionbyDominick Salvatore Chapter 4 Demand Estimation

  2. The Identification Problem

  3. Demand Estimation:Marketing Research Approaches • Consumer Surveys • Observational Research • Consumer Clinics • Market Experiments

  4. Scatter Diagram Regression Analysis

  5. Regression Analysis • Regression Line: Line of Best Fit • Regression Line: Minimizes the sum of the squared vertical deviations (et) of each point from the regression line. • Ordinary Least Squares (OLS) Method

  6. Regression Analysis

  7. Ordinary Least Squares (OLS) Model:

  8. Ordinary Least Squares (OLS) Objective: Determine the slope and intercept that minimize the sum of the squared errors.

  9. Ordinary Least Squares (OLS) Estimation Procedure

  10. Ordinary Least Squares (OLS) Estimation Example

  11. Ordinary Least Squares (OLS) Estimation Example

  12. Tests of Significance Standard Error of the Slope Estimate

  13. Tests of Significance Example Calculation

  14. Tests of Significance Example Calculation

  15. Tests of Significance Calculation of the t Statistic Degrees of Freedom = (n-k) = (10-2) = 8 Critical Value at 5% level =2.306

  16. Tests of Significance Decomposition of Sum of Squares Total Variation = Explained Variation + Unexplained Variation

  17. Tests of Significance Decomposition of Sum of Squares

  18. Tests of Significance Coefficient of Determination

  19. Tests of Significance Coefficient of Correlation

  20. Multiple Regression Analysis Model:

  21. Multiple Regression Analysis Adjusted Coefficient of Determination

  22. Multiple Regression Analysis Analysis of Variance and F Statistic

  23. Problems in Regression Analysis • Multicollinearity: Two or more explanatory variables are highly correlated. • Heteroskedasticity: Variance of error term is not independent of the Y variable. • Autocorrelation: Consecutive error terms are correlated.

  24. Durbin-Watson Statistic Test for Autocorrelation If d=2, autocorrelation is absent.

  25. Steps in Demand Estimation • Model Specification: Identify Variables • Collect Data • Specify Functional Form • Estimate Function • Test the Results

  26. Functional Form Specifications Linear Function: Power Function: Estimation Format:

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