Subject category:
Economics, Politics and Business Environment
Published by:
IESE Business School
Version: 07.16.2002
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Abstract
A car dealer wants a reference price before negotiating the purchase of a used car. Using available data on posted prices and car characteristics (year of production, kilometres shown on the odometer, horsepower etc) the aim is to help this car dealer by means of a multiple regression model. Several reasonable models are possible, each providing insights into the relevance of the different factors. The price estimates for the different models are similar, which is reassuring because the different models provide a similar answer. The teaching note presents the multiple regression analysis of the data contained in the case. Several models are proposed and are compared in terms of their explanatory power, robustness and interpretation. Some models use dummy variables, and one model uses a quadratic variable transformation. This case was previously numbered 102-050-1.
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Abstract
A car dealer wants a reference price before negotiating the purchase of a used car. Using available data on posted prices and car characteristics (year of production, kilometres shown on the odometer, horsepower etc) the aim is to help this car dealer by means of a multiple regression model. Several reasonable models are possible, each providing insights into the relevance of the different factors. The price estimates for the different models are similar, which is reassuring because the different models provide a similar answer. The teaching note presents the multiple regression analysis of the data contained in the case. Several models are proposed and are compared in terms of their explanatory power, robustness and interpretation. Some models use dummy variables, and one model uses a quadratic variable transformation. This case was previously numbered 102-050-1.