Reference no: EM132139702

A company designs a new laptop computer and wants to investigate customers' preferences with respect to three select laptop features. The features are

• Price (High vs. low)
• Processor Speed (Low vs. medium vs. high)
• Weight (Low vs. high)

The company asks customers to rank products with different feature-combinations and record a preference rating. The following regression model (table below) relates ratings with features. Notice that features are entered into the regression model as dummy variables. Specifically, the dummies are coded as

• Price_High = 1 if price is high and =0 otherwise
• Speed_High = 1 if speed is high and =0 otherwise
• Speed_Medium = 1 if speed is medium and =0 otherwise
• Weight_Low = 1 if weight is low and =0 otherwise

Regression results for customers' preference ratings are given below. Notice that the results only show the a partial regression table (i.e. there are no standard errors or p-values).

Partial Regression Results

Summary Measures

R-squared 0.70

Adj R-Squared 0.64

Regression Coefficients

(Intercept) 16.10

Price_High -4.60

Speed_High 3.70

Speed_Medium 1.30

Weight_Low 5.20

Based on the above table, what is the average rating for a laptop computer with high price, low processor speed and high weight?

16.10

11.50

18.00

20.40

25.00

Based on the above table, comparing two laptops, the first one with low weight, low processor speed and low price, and the second one with high weight, low processor speed and low price, by how much is the average rating of the second laptop different? (I.e. report the absolute value of the difference)

By 16.10

By 4.60

By 5.20

By 3.70

None of the above

Which combination of features gives the highest customer rating?

Low price, medium processor speed, low weight

Low price, high processor speed, high weight

Low price, low processor speed, low weight

High price, high processor speed, low weight

Low price, high processor speed, low weight

Provide an economic interpretation of the coefficient of "Speed_High".

The rating of a laptop with high processor speed is on average 3.70 points higher compared to a laptop with medium processor speed, all else equal.

The rating of a laptop with high processor speed is on average 3.70 points higher compared to a laptop with low processor speed, all else equal.

The rating of a laptop with high processor speed is on average 3.70 points higher compared to a laptop with high price, all else equal.

The rating of a laptop with high processor speed is on average 3.70 points higher compared to a laptop with low weight, all else equal.

None of the above.

Based on economic considerations, the company cannot offer the low price in combination with the high processor speed. Within these constraints, which combination of features now gives the highest customer rating?

Low price, medium processor speed, low weight.

Low price, high processor speed, high weight.

Low price, low processor speed, low weight.

High price, high processor speed, low weight

Low price, low processor speed, high weight