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Corporation believes the sales of the
company’s Bright Side Laundry detergent (S) are related to Vanguard’s own
advertising expenditure (A), as well as the combined advertising expenditures of
its three biggest rival detergents (R). The marketing director collects 36 weekly
observations on S, A, and R to estimate the following multiple regression
equation:
S = a + bA + cR
Where S, A, R are measured in dollars per week. Vanguard’s marketing director
is comfortable using parameter estimates that are statistically significant at the 10
percent level or better.
a)What sign does the marketing director expect a, b, and c to have?
b)Interpret the coefficients a, b, and c?
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Answer:
a positive b/c ppl will buy stuff even w/o advertizing
b positive b/c own advertizing is good
c negative b/c competition advertizing is bad
you can interpret a as ad-less sales, b and c - as effectiveness of advertising (sales per dollar spent)
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