Question

In: Statistics and Probability

As shown in the following graph, the airfare is determinined by a couple of factors. The...

As shown in the following graph, the airfare is determinined by a couple of factors. The excel file “Airfare.xlsx” include a couple of such factors, such as:
- Origin: Airport code for the origin
- Destination: Airport code for the destination
- Average Fare: Average non-stop fare for the route
- # of Airlines: Number of Airlines providing direct service between O & D
- Distance: Distance between O & D
- South_West: Whether Southwest provides a Direct Service
- Holiday_O: Whether Origin is a holiday market
- Holiday_D: Whether Destination is holiday market
- Traffic_O: Annual airport traffic at Origin è city size
- Traffic_D: Annual airport traffic at Destination è city size

Please estimate the airfare model with the following steps
- Step 1: Generate “DumHO” using Holiday_O
- Step 2: Generate “DumHD” using Holiday_D
- Step 3: Generate “DumSW” using SouthWest
- Step 4: Perform a regression analysis

Airfare = a + b1* (# of Airlines) + b2* Distance

+ b3* Traffic_O + b4* Traffic_D

+ b5* DumHO + b6* DumHD

+ b6* DumSW + ε

Answer the following questions in Excel (you can find them in the worksheet “questions”):
- Q1: One more airline in the market will (decrease/increase) average fare by $().
- Q2: Presence of South West in the market will (decrease/increase) average fare by $( ).
- Q3: One mile longer in distance will (decrease/increase) average fare by $( ).
- Q4: If destination is holiday market, average fare will (decrease/increase) by $().

Origin	Destination	Average Fare	# of Airlines	Distance	Traffic_O	Traffic_D	Holiday_O	Holiday_D	South_West
DFW	MFE	268	1	468	16.98	12.50	Yes	No	No
HOU	HRL	117	1	276	15.10	12.89	No	No	Yes
BNA	PHL	247	2	675	15.18	16.19	No	No	Yes
DFW	PHL	281	3	1302	16.98	16.19	Yes	No	No
MCO	PHL	158	3	861	16.38	16.19	Yes	No	Yes
MHT	PHL	151	3	290	14.41	16.19	No	No	Yes
PBI	PHL	148	3	951	14.89	16.19	Yes	No	No
PHX	PHL	224	4	2075	16.65	16.19	Yes	No	Yes
PIT	PHL	133	3	267	15.57	16.19	No	No	Yes

Expert Solution

o/p\ from excel for regression analysis

SUMMARY OUTPUT

Regression Statistics
Multiple R	0.971852
R Square	0.944496
Adjusted R Square	0.555965
Standard Error	41.89654
Observations	9

ANOVA
	df	SS	MS	F	Significance F
Regression	7	29869.57	4267.081	2.430941	0.458299
Residual	1	1755.32	1755.32
Total	8	31624.89

	Coefficients	Standard Error	t Stat	P-value	Lower 95%	Upper 95%	Lower 95.0%	Upper 95.0%
Intercept	-867.018	495.238	-1.751	0.330	-7159.609	5425.573	-7159.609	5425.573
# of Airlines	-57.701	41.355	-1.395	0.396	-583.161	467.760	-583.161	467.760
Distance	0.074	0.046	1.606	0.355	-0.514	0.663	-0.514	0.663
Traffic_O	48.375	24.084	2.009	0.294	-257.645	354.395	-257.645	354.395
Traffic_D	30.350	22.945	1.323	0.412	-261.197	321.896	-261.197	321.896
Holiday_O	-75.249	66.317	-1.135	0.460	-917.892	767.394	-917.892	767.394
Holiday_D	0	0	65535	0	0	0	0	0
South_West	-64.3027	47.08193	-1.36576	0	-662.535	533.9299	-662.535	533.9299

airfare = -867.012 + (-57.7008)airlines + 0.074distance + 48.375traffic_o + 30.350traffic_D + (-75.249)holiday_o + (0)holiday_D + (-64.3027)south_west

a)

one more airline will decrease the average airfare by $(57.7008)

b)

Presence of South West in the market will (decrease/ average fare by $( 64.3027)

c)

One mile longer in distance will (increase) average fare by $( 0.074 )

d)

the intercept for holiday market is 0 , so no effect on airfare by market holiday

orchestra answered 2 years ago

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