Problem Set #4 Please be careful to give calculations and explanations for you a

Question

Problem Set #4 Please be careful to give calculations and explanations for you answers. Ec 370 Summer, 2017 Michigan State University A recent paper by Ajit Kamik, entitled "Valuing Cricketeers Using Hedonic Price Models," studied the results of an auction held by the Indian Premier League on February 20, 2008. The eight teams in the league bid on 75 players. The bids were wage offers, and the team with the highest bid acquired the rights to the player and also was required to pay that player a salary equal to the high bid. In the study Karnik ran a regression to explain the bid price for each player. The paper reports the following results. Note that p values (not standard errors or t statistics) are reported in parentheses PRICE 560900.00 60010.00 RUNSR 40227.00 WKTSR 0.01 0.03 0.10 5695.00 AGE 1178.30 TSR 311320.00 IND 0.03 0.00) 0.00 2003 70.00 AUS 75834.00 RUNSAR (0.02) (3) 0.07 Adjusted R 2530 BPG 12.46 (0.09) The meaning of the variables are as follows PRICE winning bid for a player (measured in US$) RUNSR ratio of runs scored by a player in 1-day and T20 formats to the total nuns scored by all the 75 players, expressed as a percentage. WKTSR. ratio of wickets taken by a player in 1-day and T20 formats to the total wickets taken by all the 75 players, expressed as a percentage. AGE. age of the player (measured in years) Strike rate in T20 matches. Strike rate is the number of TSR. runs scored by a batsman per 100 balls faced Finally, AUS means that the player is of Australian nationality and IND means that the player is of Indian nationality. The omitted category is all other nationalities

Explanation / Answer

a.What is the dependent variable?

Price

b.How much does a player gain, in terms of salary, if he scores 1% more of total runs scored?

A player will gain 1.01 RUNSR in equation instead of RUNSR

c.Is this coefficient significant? Explain.

25.36% variation is explained by the multiple regression line. This is not significant as much variability is remained to explain.

d.What kind of variable is AUS?What does its coefficient mean?

Categorical variable, means qualitative variable. Its coefficient shows that there will bean increase of 200370 in price for each player of australia.

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