c. What can you 11. Your firm has just launched a new product and has solicited a large number of potential customers to rate its effectiveness between 0 and 100. You are particularly interested in how an individual's rating of the new product depends on his/her age. To estimate this effect, you divide the potential customers into age groups: under 25, 26-40, 41-55, and over 55. You then assume the following data-generating process: Rating, = a + BAge25, + Age2640, +B3Age4155, + B4Age55, + U Here, each Age variable is a dichotomous variable that equals 1 if individual / belongs to that age group and 0 otherwise. Use the data in the file Chap10Prob1112.xlsx. (LO4) a. Create the dichotomous variables: Age 25, Age2640, Age4155, and Age55. b. Why are you unable to estimate the effect of each age group as listed? c. Estimate and interpret the effect of changing age groups on the Rating. itd in to learn how potential 1 Rating 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Age 70 62 63 72 60 61 64 53 68 74 72 54 73 72 59 59 75 51 75 66 76 64 68 61 Income 56 44476 47 37944 28 24368 69 53682 60 47106 21 19694 49 39029 25 22561 49 38992 55 43446 85 64589 20 19065 54 43265 80 61046 23 20973 61 47863 65 50476 23 21074 81 61725 67 52188 88 66837 26 23018 18 17784 25 22408 D c. What can you 11. Your firm has just launched a new product and has solicited a large number of potential customers to rate its effectiveness between 0 and 100. You are particularly interested in how an individual's rating of the new product depends on his/her age. To estimate this effect, you divide the potential customers into age groups: under 25, 26-40, 41-55, and over 55. You then assume the following data-generating process: Rating, = a + BAge25, + Age2640, +B3Age4155, + B4Age55, + U Here, each Age variable is a dichotomous variable that equals 1 if individual / belongs to that age group and 0 otherwise. Use the data in the file Chap10Prob1112.xlsx. (LO4) a. Create the dichotomous variables: Age 25, Age2640, Age4155, and Age55. b. Why are you unable to estimate the effect of each age group as listed? c. Estimate and interpret the effect of changing age groups on the Rating. itd in to learn how potential 1 Rating 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Age 70 62 63 72 60 61 64 53 68 74 72 54 73 72 59 59 75 51 75 66 76 64 68 61 Income 56 44476 47 37944 28 24368 69 53682 60 47106 21 19694 49 39029 25 22561 49 38992 55 43446 85 64589 20 19065 54 43265 80 61046 23 20973 61 47863 65 50476 23 21074 81 61725 67 52188 88 66837 26 23018 18 17784 25 22408 D
