The following table provides the probabilities of using the coupon for the Simmo

Question

The following table provides the probabilities of using the coupon for the Simmons Stores catalog promotion. The independent variables are Xt annual spending at Simmons ($1000s) X2 = credit card variable, where x2 1 if the customer has a Simmons credit card X20 if the customer does not have a Simmons credit card Annual Spending $1000 $2000 $3000 $4000 $5000 $6000 7320 4765 $7000 7936 5617 Credit Yes 3307 4102 4948 5796 6599 Card No 1414 1881 2460 3148 3927 a. Compute the odds in favor of using the coupon for a customer with annual spending of $4000 who does not have a Simmons credit card (to 4 decimals) 0.5796 b. Compute the odds ratio for the credit card customer in part a (to 1 decimal) Use this odds ratio to complete the following statement. For a customer who spends $4000 annually, the odds of using the coupon are times greater if the customer has a credit card c. In the test, we showed that the odds ratio for a customer with an annual spending of $2000 was 3. Comparing this odds ratio to the result from part b, what is your conclusion? The odds ratio is independent of the annual spending

Explanation / Answer

The following are correct answers from given table

a) p [spends $4000 and no credit card] = 0.3148

b) p [spends $4000 and having credit card] = 0.5796

0.5796 times greater if the customer 'has' a credit card

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