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The Excel printout below resulted from fitting the following model to n = 15 data points:

y=β0+β1x1+β2x2+ε

Where,

x1=(1iflevel20ifnot) role="math" localid="1651883353071" x2=(1iflevel30ifnot)

a) Report the least squares prediction equation.

b) Interpret the values of β1 and β2.

c) Interpret the following hypotheses in terms of µ1, µ2,and µ3:

d) At least one of parameters and differs from 0

Conduct the hypothesis test of part c.

Short Answer

Expert verified

a) From the excel printout, the coefficient values can be used to write the least square prediction equation for the model. Here, y=80+16.8x1+40.4x2+ε^

b) β1and β2denotes the difference between the mean levels for different dummy variables. This means that β1=μ2-μ1 while β3=μ3-μ1

c) Here, the null hypothesis becomes that the means for the three groups are equal meaning μ1=μ2=μ3while the alternate hypothesis implies that at least two of the three means β1≠β2≠β3 differ

d) At 95% confidence level,β1≠β2≠0 Hence two of the three means differ in the model.

Step by step solution

01

Least squares prediction equation

From the excel printout, the values of the coefficients can be used to write the least square prediction equation for the model

Here,

y=80+16.8x1+40.4x2+ε

02

Interpretation of β1and β2

β1andβ2denotes difference between the mean levels for different dummy variables.

This means β1=μ2-μ1whileβ3=μ3-μ1

03

Simplification of hypothesis 

H0:β1=β2=0

Ha:At least one of parametersβ1 and β2differs from 0

Here, the null hypothesis becomes that the means for the three groups are equal meaningμ1=μ2=μ3 while the alternate hypothesis implies that at least two of the three meansμ1,μ2,μ3 differ.

04

Hypothesis testing

H0:β1=β2=0

HaAt least one of parametersβ1or role="math" localid="1651888100746" β2is non zero

Here, F test statistic=SSEn-k+1and the p-value is 0

H0is rejected if p- value<α,For since α=0.05then pis less than 0.05

Sufficient evidence to rejectH0 at 95% confidence interval.

Therefore,Hence β1≠β2two of the three means differ in the model

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Question: Shopping on Black Friday. Refer to the International Journal of Retail and Distribution Management (Vol. 39, 2011) study of shopping on Black Friday (the day after Thanksgiving), Exercise 6.16 (p. 340). Recall that researchers conducted interviews with a sample of 38 women shopping on Black Friday to gauge their shopping habits. Two of the variables measured for each shopper were age (x) and number of years shopping on Black Friday (y). Data on these two variables for the 38 shoppers are listed in the accompanying table.

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Suppose you fit the second-order model y=β0+β1x+β2x2+εto n = 25 data points. Your estimate ofβ2isβ^2= 0.47, and the estimated standard error of the estimate is 0.15.

  1. TestH0:β2=0againstHa:β2≠0. Useα=0.05.
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