Summary 169- Data can be collected from a variety of sources, including surveys,
controlled market studies, uncontrolled market data, and purchased or
published forecasts. - Regression analysis is a set of statistical techniques that quantify the
dependence of a given economic variable on one or more other
variables. The first step in regression is to formulate a model of this
relationship in terms of an equation to be estimated. The second step
is to estimate an equation that best fits the data. The usual criterion is
based on minimizing squared errors (so-called ordinary least
squares). - Regression analysis provides not only coefficient estimates but also
statistics that reflect the accuracy of the equation. Important statistics
include the equation’s R^2 , F-statistic, and standard error, and the
standard errors and t-statistics for individual coefficients. These statistics
indicate the explanatory power of individual variables and of the
equation as a whole. - There are two main categories of forecasting methods. Structural
forecasts rely on estimated equations describing relationships between
economic variables. Nonstructural methods (such as time-series analysis
and barometric methods) track observed patterns in economic variables
over time. Time-series analysis relies on the identification of trends,
cyclical fluctuations, and seasonal variations to predict the course of
economic variables. Barometric methods (leading indicators) are used to
forecast the general course of the economy and changes in particular
sectors. - Forecasting accuracy has improved over time, but incremental gains have
been small.
Questions and Problems
- Discuss and compare the advantages and disadvantages of survey
methods and test marketing. - Coca-Cola Company introduced New Coke largely because of Pepsi’s
success in taste tests head to head with Coke Classic.
a. Consider the following hypothetical information: (1) In blind taste
tests, 58 percent of subjects preferred Pepsi to Coke Classic; (2) in
similar tests, 58 percent of subjects preferred the taste of New Coke to
Pepsi. From these findings, what can Coca-Cola’s management
conclude about consumers’ preferences between Coke Classic and
New Coke?
b. Consider the following preference rankings of three different types of
consumers A, B, and C:
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