Question

Introduction Rent-a-Car is one of the two car rental agencies serving a small regional airport in the U.S. Midwest. Forty per cent (40%) of its customers are airline passengers and the remaining sixty per cent (60%) are dwellers of the small nearby college town who use rental cars for business and leisure trips. The airport is within two miles from campus and approximately six miles from the city center. It is easy to reach by car, taxi, or city bus. You are a manager of Rent-a-Car. Your fleet consists of 72 cars, of which 47 fall into the “economy” class and 25 in the “luxury” class. Whenever demand for cars in some class exceeds the number of cars available, additional vehicles can be delivered from the nearest company hub in the state capital 70 miles away. Alternatively, some customers unable to rent an economy-class car may be upgraded to a luxuryclass car at no extra cost to them. Your only competitor at this location has a more sophisticated system of car category tiers, which consist of Compact, Economy, Mid-size, and Large cars. Assignment: Part 1 In order to better understand your unit’s operating environment, you are asked to provide an estimate of the demand equation that would account for various factors that affect your customer traffic. Estimating the demand equation is useful for future analysis of your unit’s performance. You need to “request” the data for your empirical study. Specifically, (1) What are you planning to use as the dependent variable in your regression? (2) What other data would you need and can realistically get? You may request information for up to five independent variables. For each variable you “request”, provide reasons why you expect it to be important for your analysis and explain the expected sign of the relationship between the proposed independent variable and the dependent variable Assignment: Part 2 After you have prepared your request, access the data file provided and see what variables you have data for. Then estimate the demand function for Rent-a-Car using regression techniques. Submit a report (Word document) and your analysis (Excel file) for grading. Your report must include separate sections on your initial request for variables (Part 1 above) and any modifications or substitutions you needed to make based on the variables that were available. You will be assessed based on the case that you present as well as your analysis. Make sure you include an interpretation of all coefficients if your estimated demand function.

Description of variables in the Rent-a-Car data set
PownE	Average daily rate Rent-A-Car charged for its economy cars in a given week
PownL	Average daily rate Rent-A-Car charged for its luxury vehicles in a given week
Pcomp	Average daily rate of the only competitor across all vehicle categories
Session	Binary variable with 1 indicating weeks when college is in session
Weather	Number of days in a week with severe weather
Unemployment	Number of unemployed workers in the county as of Tuesday each week
FlghtWk	Number of flights (in- and outbound) serving the local airport that week
CancWk	Total number of flights cancelled that week
Holiday	Binary variable with 1 indicating weeks of national holidays (long weekends)
Wrecks	Number of major accidents that week
Discount	Number of customers in a given week using the 15 percent discount off the base rate offered through our affiliate partner, a credit card company
Upgrade	Number of customers who received a free upgrade to a luxury vehicle due to the unavailability of economy vehicles
TotalAd	Amount spent on local advertising each week
AdBlbd	Weekly spending on billboard ads
AdPaper	Weekly spending on ads in local newspapers, including the online version
AdTV	Weekly spending on ads placed with local TV
QE	Number of rental contracts initiated each week in the economy category
Q_length	Number of paid days of rentals, grouped by the agreement starting date
Age<25	Number of rental agreements in a given week for which the person listed as the primary driver on the rental agreement was less than 25 years old
Age25_50	Number of rental agreements for which the person listed as the primary driver on the rental agreement was between 25 and 50 years of age
Age51+	Number of rental agreements in a given week for which the person listed as the primary driver on the rental agreement was 51 years of age or older
FleetAge	Average age of our fleet measured in weeks
BedTax	Amounts collected from the 1% local hospitality tax in the county - this information is reported only on a monthly basis

Week	PownE	PownL	Pcomp	Session	Weather	Unempl	FlghtWk	CancWk	Holiday	Wrecks	Discount	Upgrades	TotalAd	AdBlbd	AdPaper	AdTV	QE	Q_length	Age <25	Age 25-50	Age 51+	FleetAge	Bed'Tax
1	29.99	37.99	37.75	0	4	701	41	9	0	22	12	8	430	430	0	0	87	334	9	64	14	50.3	104025.67
2	29.99	41.99	41.5	0	1	739	41	2	0	16	7	0	430	430	0	0	76	327	13	46	17	51.3
3	24.99	26.99	35.25	0	2	814	41	3	0	12	6	5	430	430	0	0	82	315	20	51	11	52.3
4	28.99	37.99	35.5	1	1	880	47	0	1	6	8	2	430	430	0	0	77	275	24	42	11	53.3
5	24.99	36.99	24.5	1	0	881	47	0	0	10	10	0	430	430	0	0	76	316	20	51	5	54.3	70251.75
6	29.99	43.99	28.75	1	3	799	47	6	0	17	2	4	430	430	0	0	78	301	15	59	4	55.3
7	28.99	44.99	34.5	1	1	857	47	0	0	20	3	1	815	815	0	0	81	355	14	55	12	56.3
8	21.99	25.99	33	1	0	871	47	0	0	4	1	8	815	815	0	0	91	332	20	61	10	57.3
9	26.76	48.99	29.5	1	0	870	47	0	0	12	1	0	815	815	0	0	77	260	20	40	17	58.3	80998.15
10	28.99	42.99	38.25	1	2	889	47	3	0	19	9	1	815	815	0	0	84	317	22	44	18	59.3
11	25.99	37.99	28	1	0	855	47	0	0	9	4	1	2197	815	1382	0	76	291	14	49	13	60.3
12	25.99	37.99	30.25	1	0	911	48	2	0	4	5	0	2520	815	1705	0	75	350	10	54	11	61.3
13	25.99	28.99	31.5	1	0	894	48	0	0	15	1	0	1646	815	831	0	68	448	22	36	10	62.3
14	24.99	38.99	28.5	0	0	909	48	0	0	5	11	0	815	815	0	0	89	481	38	38	13	63.3	72072.62
15	24.99	40.99	30.25	1	1	956	48	0	0	12	6	11	815	815	0	0	68	261	21	35	12	64.3
16	23.99	34.99	28.25	1	0	988	48	0	0	8	5	0	815	815	0	0	63	227	16	32	15	28.5
17	30.99	41.99	36	1	0	983	48	0	0	9	6	0	815	815	0	0	52	186	9	31	12	29.5
18	24.99	41.99	30.5	1	1	938	62	3	0	1	10	7	815	815	0	0	94	405	20	64	10	30.5	83166.36
19	26.99	41.99	31	1	0	939	62	0	0	1	0	1	815	815	0	0	78	314	14	54	10	31.5
20	25.99	45.99	32	1	0	948	62	0	0	3	3	3	1455	815	640	0	87	338	12	66	9	32.5
21	26.99	45.99	32.5	1	0	902	64	0	0	7	4	0	4965	815	640	3510	70	248	19	34	17	33.5
22	29.99	45.99	31	0	2	888	64	1	0	17	5	3	4325	815	0	3510	86	287	27	45	14	34.5
23	29.99	41.99	33.75	0	0	937	64	1	0	12	5	0	4325	815	0	3510	68	264	21	31	16	35.5	92470.99
24	29.99	41.99	31.25	1	0	953	64	0	0	12	11	2	4325	815	0	3510	84	405	15	51	18	36.5
25	24.99	41.99	32.5	1	0	983	58	0	0	8	9	2	4325	815	0	3510	86	374	15	52	19	37.5
26	28.99	40.99	34.75	1	0	988	58	2	0	9	6	4	4325	815	0	3510	84	458	9	60	15	38.5
27	24.99	46.99	33	1	0	995	58	0	1	11	11	4	4325	815	0	3510	92	400	10	68	14	39.5	91174.48
28	29.99	40.99	31.5	0	0	961	58	0	0	2	3	0	4325	815	0	3510	81	459	11	53	17	40.5
29	28.99	37.99	37.75	1	0	996	58	0	0	6	6	2	4325	815	0	3510	85	396	14	60	11	41.5
30	27.99	37.99	37.5	1	0	945	58	0	0	1	8	2	4018	508	0	3510	89	458	14	63	12	42.5
31	29.99	37.99	37.25	1	0	986	59	0	0	5	8	0	6268	508	0	5760	80	344	16	48	16	43.5
32	26.99	40.99	31	1	1	953	59	0	0	5	5	0	4018	508	0	3510	80	269	17	48	15	44.5	182486.48
33	30.99	39.99	37.25	0	0	989	59	3	0	6	3	5	4018	508	0	3510	85	332	15	56	14	45.5
34	31.99	46.99	38.25	0	0	1031	59	0	0	13	10	0	4018	508	0	3510	77	303	22	37	18	46.5
35	30.99	46.99	31.25	1	0	1042	59	0	0	5	8	0	4853	508	835	3510	67	297	23	28	16	47.5
36	27.99	38.99	32.25	1	0	1023	59	0	1	2	9	2	3477	508	835	2134	81	478	14	51	16	48.5	56038.77
37	28.99	40.99	37	1	0	1045	61	0	0	7	6	1	4485	508	1843	2134	84	263	21	48	15	49.5
38	29.99	37.99	38.75	1	0	1065	61	0	0	11	6	0	2642	508	0	2134	78	367	20	44	14	50.5
39	30.99	41.99	37.75	1	0	1037	61	0	0	15	3	0	2642	508	0	2134	71	263	22	32	17	33.2
40	30.99	42.99	39.5	1	0	1052	61	0	0	11	11	1	2642	508	0	2134	77	222	14	43	20	34.2	123935.45
41	26.99	41.99	31	1	0	1055	61	0	0	12	9	3	508	508	0	0	89	279	9	63	17	35.2
42	31.99	38.99	31.25	1	1	1071	61	3	0	12	2	0	508	508	0	0	71	343	16	38	17	36.2
43	34.99	39.99	35	0	0	1104	61	0	0	11	4	0	1237	1237	0	0	61	294	16	27	18	37.2
44	28.99	40.99	35.75	1	0	1145	61	0	0	7	8	0	1237	1237	0	0	72	349	14	42	16	38.2
45	25.99	41.99	37.5	1	0	1157	61	0	0	6	3	4	3117	1237	0	1880	101	441	14	71	16	39.2	99591.43
46	34.99	46.99	31.5	1	0	1136	61	0	0	9	0	0	1237	1237	0	0	52	215	16	24	12	40.2
47	25.99	37.99	33.25	1	2	1140	61	2	1	15	2	5	1237	1237	0	0	103	388	17	74	12	41.2
48	28.99	42.99	39.5	1	0	1146	58	2	0	12	9	0	1237	1237	0	0	75	354	12	49	14	42.2
49	27.99	45.99	37	1	2	1156	58	4	0	14	1	0	3852	1237	0	2615	95	372	7	71	17	43.2	70942.70
50	34.99	40.99	30.5	1	0	1166	53	0	0	18	11	2	1237	1237	0	0	73	452	9	53	11	44.2
51	34.99	39.99	30	0	1	1175	53	0	0	21	2	7	1237	1237	0	0	89	362	15	55	19	45.2
52	26.99	41.99	35.25	0	0	1155	53	0	1	6	7	0	1237	1237	0	0	82	353	14	51	17	46.2

Answer 1

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