Can money spent on gifts buy love? Refer to the Journal of Experimental Social Psychology (Vol. 45, 2009) study of whether buying gifts truly buys love, Exercise 9.9 (p. 533). Recall that study participants were randomly assigned to play the role of gift-giver or gift-receiver. Gift-receivers were asked to provide the level of appreciation (measured on a 7-point scale where 1 = “not at all” and 7 = “to a great extent”) they had for the last birthday gift they received from a loved one. Gift-givers were asked to recall the last birthday gift they gave to a loved one and to provide the level of appreciation the loved one had for the gift.

a. Write a dummy variable regression model that will allow the researchers to compare the average level of appreciation for birthday gift-givers 1mG2 with the average for birthday gift-receivers 1mR2.

b. Express each of the model’s b parameters in terms of mG and mR.

c. The researchers hypothesize that the average level of appreciation is higher for birthday gift-givers than for birthday gift-receivers. Explain how to test this hypothesis using the regression model.