Step Exam

The Strategy, Tactics, and Economics of Pricing

Final Exam, Aug 2016 (Time Limit: 1 hour)

PART II

Name: Haveen ID:1511396

This is an individual exam. Please type your name below the following statement to indicate that you honored the individual nature of this exam.

On my honor, I declare that all the answers below are a result of my individual work. I have neither given nor received help during this exam.

1. Estimate a linear regression of Nabisco-Sales as a function of prices (Nabisco & Keebler) and Display & Feature levels (Nabisco & Keebler)

a. Paste the regression statistics in the space below

b. Ignoring statistical significance, interpret the coefficients of the linear regression.

i. Specifically, based on the regression coefficients what is the nature of the relationship between Nabisco and Keebler (substitutes or complements)

varible 4 | varible 2 |

K - Price | N -Price |

1.109794208 | -1.871078 |

From the table it is clear that increase in price of k leads to increase in sales of N, thus indicating that both are substitute to each other

ii. Interpret the regression coefficients for Display & Feature variable. Explain in what way they do/do not make sense to you, given the relationship you described above.

varible 1 | varible 3 |

N- D+F | K- D+F |

-9.431407208 | -14.68658528 |

From the table it is clear that both increase in Display & feature for N as well as K, reduces the sales of N

What doesn’t makes sense is that as both K & N are substitutes increase in features & display of one should increase the sale of the other. But instead of this it reduces the sale irrespective of who increase the display & features

2. Estimate a linear regression of Nabisco sales using only prices of Nabisco and Keebler as dependent variables.

c. Paste the...