9781118041581

Summary 181

the coefficient 12.4 represents the difference in the constant terms

between summer and winter. To allow different rates of increase, the

company could estimate the equation Qta cW bt d(Wt). The

last term includes an additional explanatory variable, the product of the

winter dummy and the time variable. To illustrate, suppose the estimated

equation is found to be Qt78.4 2.9t 13.2W .7(Wt). Then the

summer equation (setting W 0) is Qt78.4 2.9t, and the winter

equation (setting W 1) is Qt91.6 2.2t. Here, the winter and

summer seasons display different constant terms and different time

coefficients.

c04EstimatingandForecastingDemand.qxd 9/5/11 5:49 PM Page 181