Rent-a-Car Case Study Task 2: To advertise or not to advertise? Managerial Economics (ResEcon 428) University of Massachusetts Amherst

Due: February 20, 10:00 am ET

In Case Study 1 you successfully produced a report to inform the upper management of the proper acquisition price for the other rental car agency. Well done! Your company has now decided to look into the eectiveness of the money spent on advertising the business. Your manager would like you to provide a comprehensive report on this issue and also include your recommendations for advertising strategies moving forward. The marketing department provides you with a dataset that includes detailed data on the history of sales and advertisement expenditure. You may download the dataset case_study_advertising.xlsx from Moodle. The dataset has six variables: Variable Description week Indicator for business week (1 to 52) QE Number of rental contracts initiated each week in the "economy" car class TotlAD Total weekly expenditure on advertising (dollars) AdBlbd Weekly expenditure on billboard advertising (dollars) AdPaper Weekly expenditure on newspaper advertising, including the online version (dollars) AdTV Weekly expenditure on television advertising (dollars)

Write a report to assist the upper management team on an advertising strategy. The report should include an analysis of the eectiveness of advertising in the past to inform future advertising decisions.

Your report should include the following components: 1. The number of weekly rental contracts may be a function of: (a) Total advertising expenditure in the current week (b) Total advertising expenditure in the previous week (c) Both the total advertising expenditure in the current week and the total advertising expenditure in the previous week Choose one of these three regression specications for your analysis. Justify your selection on the basis of the t of your regression equation and the statistical signicance of the estimated slope parameters.

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2. Using your preferred regression specication, describe the eect of an additional $1 of advertising on the number of rental contracts. 3. The eect of advertising expenditure on the number of rental contracts may be non-linear. For example, too much advertising may "wear out" the consumer. Test for this "wear out" eect by including a quadratic term in your regression. Clearly dene your new regression model and provide a conclusion on whether this "wear out" eect exists. 4. Managementsuspectsthatcertaintypesofadvertisingmaybebetterthanothers. Testthisideaby using expenditure data for each type of advertisingbillboard, newspaper, and televisionrather than the total advertising expenditure. For simplicity, test one type of advertising at a time. For each type of advertising, clearly dene your regression model and describe the estimated eect of advertising expenditure, including consideration of the slope parameter's statistical signicance. Conduct this analysis for all three types of advertising and conclude which types are eective. Note: 1. The purpose of this assignment is for you to: (a) Apply regression analysis to business decision making (b) Practicechoosingtheappropriatedependentandindependentvariablesandregressionmodel (c) Practice running regressions in Excel (d) Produce an accurate and comprehensive report based on your regression results