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LT6: IV2

LT6: IV2. Sam Marden s.h.marden@lse.ac.uk. Question 1 & 2. We estimate the following demand equation ln ( packpc ) = b 0 + b 1 ln( avgprs ) +u What do we require for a consistent estimate of b 1 ? What is the biggest problem we are likely to face ? What is the likely direction of bias?

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LT6: IV2