Question

3. A market researcher wishes to estimate the demand for a gaming console made by company M. M competes with two other companies S and N. The researcher believes that the log of demand for the gaming console, In M, depends on the log of the price of M, In PM, and the log of the price of each of the substitutes, In Ps and In Py along with the log of the income level, In inc, the percentage of males aged 15-32 (PCTMALE), and the number of game titles available, TITLE. (a) Write out a population regression function that specifies this relation. (2 marks) (b) Suppose that your model from (a) is estimated (the regression is run). Now you wish to jointly test if cross-price elasticities of demand are the same and both price-elasticity and income-elasticity of demand are equal to 1 (unity). Write out the null hypothesis that you are testing and write out the new regression that can be estimated to carry out this test. (5 marks) (c) Explain whether it will be possible to use the R-squared form of the F-test to test the set of restrictions from (b). (3 marks)

          3. A market researcher wishes to estimate the demand for a gaming console made by
company M. M competes with two other companies S and N. The researcher believes
that the log of demand for the gaming console, In M, depends on the log of the price of
M, In PM, and the log of the price of each of the substitutes, In Ps and In Py along with
the log of the income level, In inc, the percentage of males aged 15-32 (PCTMALE),
and the number of game titles available, TITLE.
(a) Write out a population regression function that specifies this relation. (2 marks)
(b) Suppose that your model from (a) is estimated (the regression is run). Now you
wish to jointly test if cross-price elasticities of demand are the same and both
price-elasticity and income-elasticity of demand are equal to 1 (unity). Write out
the null hypothesis that you are testing and write out the new regression that can
be estimated to carry out this test. (5 marks)
(c) Explain whether it will be possible to use the R-squared form of the F-test to
test the set of restrictions from (b). (3 marks)

3. A market researcher wishes to estimate the demand for a gaming console made by
company M. M competes with two other companies S and N. The researcher believes
that the log of demand for the gaming console, In M, depends on the log of the price of
M, In PM, and the log of the price of each of the substitutes, In Ps and In Py along with
the log of the income level, In inc, the percentage of males aged 15-32 (PCTMALE),
and the number of game titles available, TITLE.
(a) Write out a population regression function that specifies this relation. (2 marks)
(b) Suppose that your model from (a) is estimated (the regression is run). Now you
wish to jointly test if cross-price elasticities of demand are the same and both
price-elasticity and income-elasticity of demand are equal to 1 (unity). Write out
the null hypothesis that you are testing and write out the new regression that can
be estimated to carry out this test. (5 marks)
(c) Explain whether it will be possible to use the R-squared form of the F-test to
test the set of restrictions from (b). (3 marks)

Added by Miguel -Ngel S.

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