Managerial Economics in a Global Economy 5 th
Managerial Economics in a Global Economy, 5 th Edition by Dominick Salvatore Chapter 4 Demand Estimation Prepared by Robert F. Brooker, Ph. D. Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Slide
The Identification Problem Prepared by Robert F. Brooker, Ph. D. Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Slide
Demand Estimation: Marketing Research Approaches • • Consumer Surveys Observational Research Consumer Clinics Market Experiments Prepared by Robert F. Brooker, Ph. D. Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Slide
Regression Analysis Scatter Diagram Prepared by Robert F. Brooker, Ph. D. Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Slide
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 Prepared by Robert F. Brooker, Ph. D. Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Slide
Regression Analysis Prepared by Robert F. Brooker, Ph. D. Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Slide
Ordinary Least Squares (OLS) Model: Prepared by Robert F. Brooker, Ph. D. Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Slide
Ordinary Least Squares (OLS) Objective: Determine the slope and intercept that minimize the sum of the squared errors. Prepared by Robert F. Brooker, Ph. D. Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Slide
Ordinary Least Squares (OLS) Estimation Procedure Prepared by Robert F. Brooker, Ph. D. Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Slide
Ordinary Least Squares (OLS) Estimation Example Prepared by Robert F. Brooker, Ph. D. Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Slide
Ordinary Least Squares (OLS) Estimation Example Prepared by Robert F. Brooker, Ph. D. Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Slide
Tests of Significance Standard Error of the Slope Estimate Prepared by Robert F. Brooker, Ph. D. Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Slide
Tests of Significance Example Calculation Prepared by Robert F. Brooker, Ph. D. Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Slide
Tests of Significance Example Calculation Prepared by Robert F. Brooker, Ph. D. Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Slide
Tests of Significance Calculation of the t Statistic Degrees of Freedom = (n-k) = (10 -2) = 8 Critical Value at 5% level =2. 306 Prepared by Robert F. Brooker, Ph. D. Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Slide
Tests of Significance Decomposition of Sum of Squares Total Variation = Explained Variation + Unexplained Variation Prepared by Robert F. Brooker, Ph. D. Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Slide
Tests of Significance Decomposition of Sum of Squares Prepared by Robert F. Brooker, Ph. D. Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Slide
Tests of Significance Coefficient of Determination Prepared by Robert F. Brooker, Ph. D. Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Slide
Tests of Significance Coefficient of Correlation Prepared by Robert F. Brooker, Ph. D. Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Slide
Multiple Regression Analysis Model: Prepared by Robert F. Brooker, Ph. D. Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Slide
Multiple Regression Analysis Adjusted Coefficient of Determination Prepared by Robert F. Brooker, Ph. D. Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Slide
Multiple Regression Analysis of Variance and F Statistic Prepared by Robert F. Brooker, Ph. D. Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Slide
Prepared by Robert F. Brooker, Ph. D. Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Slide
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. Prepared by Robert F. Brooker, Ph. D. Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Slide
Durbin-Watson Statistic Test for Autocorrelation If d=2, autocorrelation is absent. Prepared by Robert F. Brooker, Ph. D. Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Slide
Steps in Demand Estimation • • • Model Specification: Identify Variables Collect Data Specify Functional Form Estimate Function Test the Results Prepared by Robert F. Brooker, Ph. D. Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Slide
Functional Form Specifications Linear Function: Power Function: Prepared by Robert F. Brooker, Ph. D. Estimation Format: Copyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Slide
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