Question

In: Statistics and Probability

In this set of questions, we utilize the dataset from “Revisiting the Relationship between Competition and...

In this set of questions, we utilize the dataset from “Revisiting the Relationship between Competition
and Price Discrimination” written by Chandra and Lederman (2018) to look at some interesting
questions and help you gain some knowledge in the airline industry and learn some econometric
methods.
The Herfindahl index (also known as Herfindahl–Hirschman Index, or herf in this dataset) is a
measure of the size of firms in relation to the industry and an indicator of the amount of competition
among them. (From Wikipedia). A route served by just one single carrier is considered a monopoly
route, having a HHI of 1. Also note that in this dataset herf is already in percentage terms (the
maximum is 1 = 100%). Be careful of the units in your interpretations and calculations. Look at the
Stata output below and answer the following questions.
Some additional variables include totpass (total number of passengers), num_car_dir (the
number of direct rivals, or competitors), coach_fare (economy class average fare), and biz_fare
(business class average fare). Please use these information and answer some questions.
Exhibit A:

Exhibit B:
biz_fare 3,144 867.7217 459.3443 88.74747 2648
coach_fare 11,064 252.9349 102.1054 64.98026 738.9227
num_car_dir 11,064 .8325199 .6392407 0 3
totpass 11,064 10299.42 12526.24 402 106526
herf 11,064 .695997 .2235478 .2529875 1
Variable Obs Mean Std. Dev. Min Max

99% 2218.451 2648 Kurtosis 3.239269
95% 1693.641 2641 Skewness .6624805
90% 1481.809 2641 Variance 210997.2
75% 1149.276 2515.4

Largest Std. Dev. 459.3443
50% 852.9616 Mean 867.7217
25% 476.6543 170.6522 Sum of Wgt. 3,144
10% 302.2302 157.7417 Obs 3,144
5% 245.9518 89.56604
1% 205.7657 88.74747
Percentiles Smallest
(mean) avfare

Exam 3 – Econ 215 (Chuang)

Page 4

1. (2 points) What is the lowest Herfindahl-Hirschman Index in the dataset?
2. (2 points) What is the highest number of direct rivals in the dataset?
3. (3 points) What is the interquartile range for this “average fare” as depicted in Exhibit B? How do
you know that?
4. (3 points) Daniella has heard that on average the business class fares are more than double the
prices of economy class tickets. Since you are smart, she is counting on you to verify this for her
using the current dataset. What would be your response to her in this case using Exhibits A and B?
5. (3 points) Carly is taking Econ 215 and doing some analyses using this dataset. However, she
forgets what Exhibit B is about. She sees that Exhibit B is the average fare of something, but she
can’t remember if this average fare is for economy class or for business class. Can you tell her what
this average fare is for? Why?
6. (4 points) It turns out that Carly also loses her original Stata codes on how you could generate such
results shown in Exhibit B. Since you are smart, can you provide her the single line of code that
would generate the output in Exhibit B (assuming the dataset has been loaded successfully)?

Solutions

Expert Solution

1. What is the lowest Herfindahl-Hirschman Index in the dataset?

Answer: Minimum for Herfindahl-Hirschman Index is 0.253

2. What is the highest number of direct rivals in the dataset?

Answer : the highest number of direct rivals in the dataset is 3

3. What is the interquartile range for this “average fare” as depicted in Exhibit B? How do you know that?

Answer: Interquartile range is Q3-Q1 = 1149.276 - 476.6543 = 672.6217

4. Daniella has heard that on average the business class fares are more than double the prices of economy class tickets. Since you are smart, she is counting on you to verify this for her using the current dataset. What would be your response to her in this case using Exhibits A and B?

Yes, the fare for business fares is more than double the price of economy class.


Related Solutions

Q7 This is from a dataset of 420 CA school districts. We estimate the relationship between...
Q7 This is from a dataset of 420 CA school districts. We estimate the relationship between the student-teacher ratio (X1=STR) and test scores (Y=TestScore), controlling for the percentage of English learners in the classroom (X2=PctEL): TestScore=686.0-1.10*STR-0.65*PctEL The standard error of beta0hat is 8.7. The standard error of beta1hat is 0.43. The standard error of beta2hat is 0.31. Test the statistical significance of STR using alpha=0.05. What is the lower bound of your 95% confidence interval? Round to two decimal places.
Q6 This is from a dataset of 420 CA school districts. We estimate the relationship between...
Q6 This is from a dataset of 420 CA school districts. We estimate the relationship between the student-teacher ratio (X1=STR) and test scores (Y=TestScore), controlling for the percentage of English learners in the classroom (X2=PctEL): TestScore=686.0-1.10*STR-0.65*PctEL The standard error of beta0hat is 8.7. The standard error of beta1hat is 0.43. The standard error of beta2hat is 0.31. Test the statistical significance of STR using alpha=0.05. What is your p-value? Round to four decimal places.
What is the relationship between the budget set and wage? What is the relationship between the...
What is the relationship between the budget set and wage? What is the relationship between the budget set and nonlabor income? What happen to the budget constant if nonlabor income increases? What happen to the budget constant if wage increase? How is the optimal allocation of leisure and money income determined?
explain how this relationship between niche overlap, phylogenetic relationship , and competition would lead to the...
explain how this relationship between niche overlap, phylogenetic relationship , and competition would lead to the prediction that competitive exclusion of one species by another is more likely when two species are close relatives.
You will utilize a large dataset to create a predictive analytics algorithm in Python. For this...
You will utilize a large dataset to create a predictive analytics algorithm in Python. For this assignment, complete the following: Utilize one of the following Web sites to identify a dataset to use, preferably over 500K from Google databases, kaggle, or the .gov data website Utilize a machine learning algorithm to create a prediction. K-nearest neighbors is recommended as an introductory algorithm. Your algorithm should read in the dataset, segmenting the data with 70% used for training and 30% used...
Which of the following statements about the relationship between perfect competition and efficiency is NOT correct?...
Which of the following statements about the relationship between perfect competition and efficiency is NOT correct? (a) In the short run, and assuming no other externalities, a perfectly competitive industry achieves allocative efficiency: that is, it produces the quantity which maximizes short-run gains from trade. (b) In the long run, and assuming no other externalities, a perfectly competitive industry with free entry achieves productive efficiency: that is, output is produced at minimum average cost. (c) In the long run, a...
1:) The dataset shows 15 observations of the relationship between cricket chirps (measured in chirps per...
1:) The dataset shows 15 observations of the relationship between cricket chirps (measured in chirps per second) and outside ground temperature (in Fahrenheit). A. Create a scatterplot by putting chirps on the vertical axis and temperature on the horizontal axis. Be sure to properly label the scatterplot with a title, axes titles, and the proper units of the variables. B. Estimate the following relationship: ?h????=?0+?1???????????(Chirps) ̂=b_0+b_1 Temperature. C. Interpret the slope in the context of the problem. D. Interpret the...
In R: Consider dataset “juul” from library “ISwR”. (juul is a built in data set) Are...
In R: Consider dataset “juul” from library “ISwR”. (juul is a built in data set) Are the means of igf1 equal among tanner groups at 5% level? Please use the six step process to test statistical hypotheses for this research problem. Note: You need to convert tanner from numeric to factor type and ignore all the NAs.
Consider the Hotelling model of the competition between two firms. They must choose to set up...
Consider the Hotelling model of the competition between two firms. They must choose to set up business on a line (=1). Select all that apply. (PLEASE EXPLAIN ANSWERS COMPLETELY) a. If both firms are localized in position 1/2 (i.e., center of the line), neither firm has incentives to deviate and move to a different position. b. If Firm 1 and Firm 2 localize at the same point along the line, they will each sell to 50% of the consumers. c....
Describe the relationship between interest rates set by the Fed and inflation rates.
Describe the relationship between interest rates set by the Fed and inflation rates.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT