+1-415-670-9189
info@expertsmind.com
Find confidence intervals for the coefficients
Course:- Microeconomics
Reference No.:- EM13149069




Assignment Help
Assignment Help >> Microeconomics

This question is concerned with the value of Major League Baseball (MLB) franchises. The data was obtained for all U.S. franchises across the 1992 to 1997 period.  

Here you do not need to run the regression; we will focus on hypothesis testing and interpretation.  The regression results are provided below, using 176 observations. The variable Franchise Value is the dependent variable.

Variable

Coefficient

Standard Error

t-stat

p-value

 

constant

52.88

13.22

4.00

0.000

***

Income

0.001

0.00057

1.75

0.083

*

Pop

3.03

0.30

10.21

0.000

***

Place

-1.83

0.75

-2.43

0.017

**

New Team

5.05

6.56

0.77

0.443

 

New Facility

17.07

3.60

4.74

0.000

***

Regid

11.98

6.97

1.72

0.088

*

Regpop

-2.90

0.64

-4.55

0.000

***

            Adjusted R-squared = 0.57

The variables are defined as follows:

Franchise Value =  the present discounted value of the team's net revenue stream at the point in time (in millions of 1997 US Dollars)

Income = City's Real Per Capita Income (1997 US Dollars);

Pop = City's population (millions);

Place = Team's final divisional standings in the previous season (min=1, max=7);

New Team = equals 1 for the first 3 years the team enters the league, 0.8 in the 4th year, 0.6 in the 5th year, 0.4 in the 6th year, 0.2 in the 7th year, and 0 beyond [we interpret this coefficient in the same manner as any other variable - increasing this variable by one whole unit (i.e. changing from zero to 1) will have some differential effect on franchise value]; 

New Facility = dummy equal to one if the team is playing in a new stadium, and zero otherwise;

Regid = dummy equal to one if the team has what the authors characterize as a "regional identity" (i.e. the 'Colorado' Rockies and the 'Florida' Marlins have a "regional identity" where the 'St. Louis' Cardinals and the 'Cincinnati' Reds do not);

Regpop = Regid * Pop = this is an "interaction term".  The authors include this variable to test the specific hypothesis of whether the effect of "regional identity" varies with market size.

a. Explain briefly how each of the variables affects the value of an MLB franchise (i.e., use the variable definitions above to interpret, in words, the coefficient estimates with regard to each variable).

b. Find 90% confidence intervals for the coefficients on Pop, Place, and Income.




Put your comment
 
Minimize


Ask Question & Get Answers from Experts
Browse some more (Microeconomics) Materials
An airline loses money on one of its routes but has decided to continue to provide service. Could this decision be economically rational in the short-run? In the long-run?
Compare your level of confidence at the time you completed Part I to your confidence level for Part II, when you used this decision aid.Was it helpful? What were its adva
Consider an economy composed of identical individuals who live for two periods. These individuals have preferences over consumption in period 1 and 2 given by U = (c1)0.5 ×
Draw a diagram and find out the equilibrium price and quantity. Suppose the government sets a price ceiling of $11. What will be the effect of such a policy: a shortage or a
What factors explain the high degree of independence of the Fed? 5. What factors limit the independence of the Fed? 6. What is the case in favor of Fed independence? What is t
Judy has decided to allocate exactly $500 to college textbooks every year, even though she knows that the prices are likely to increase by 5 to 10 percent per year and that sh
Examine a perfectly competitive firm that you have recently purchased a product from, focusing specifically on how the firm operates relative to the characteristics of the m
Examine the major implications for firms entering into a merger. Explain the criteria the U.S. Department of Justice and the Federal Trade Commission would follow when decid