Suppose we write down the following model for the final price of iPod auctions o

Question

Suppose we write down the following model for the final price of iPod auctions on eBay:

2.For each coefficient, write down the hypothesis test (a null hypothesis and alternative hypothesis) corresponding to the sign you expect for each coefficient. (Hint: these should all be one-sided tests.)

PRICE, = f0 +m . NEW, + 2 . SCRATCH-+ 3 . PERCENT, + /,-BIDRS, +e,, where PRICE,is the final price of auction i, NEW, is a dummy variable which equals one whern the iPod is new, SCRATCH, is a dummy variable which equals one if the iPod is scratched PERCENT, is the percentage of positive seller feedback and BIDRS, is the number of bidders in the auction i, Each of the following questions has four parts, referring to each of the slope coefficients: Bi, p2, 3, and corresponding to the variables NEW, SCRATCH, PERCENT,' and BlDRS!

Explanation / Answer

1) H0: New 0

H1: New > 0

Sign: positive

2) H0: scratch 0

H1: scratch > 0

Sign: negative

3) H0: percent 0

H1: percent > 0

Sign: positive

4) H0: BIDRS 0

H1: BIDRS> 0

Sign: positive

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