13.4 The Baltic Shipping Company, Denmark, is estimating the delivery time 1Y, in minutes2 for an order made to their company. The order needs to be shipped to Brofjorden 1X12, Norrköping 1X22, Stockholm 1X32. The company takes into account the total number of parcels included in the order and the age of van that will be used for delivery.

a. Justify whether the following model is suitable for the company for dummy variable model analysis.

Y = b0 + b1X1 + b2X2 + b3X3 + b4X4 + b5X5 + e where X4 = Total number of parcels X5 = Age of the van

b. For a model that can be estimated is as follows:

Y = b0 + b1X1 + b2X2 + b3X3 + b4X4 + e where the excluded category is Stockholm, determine the constants for each region in the model.

Application Exercises