Assignment 3 Solutions: Analyzing Cola

Output of linear regression analysis

Model Summary

Std. Error of the

Model R R Square Adjusted R Square Estimate

a
1 .733 .537 .528 .32849

a. Predictors: (Constant), CompFeature, CompDisp, lnOwnPrice, OwnDisplay, lnCompPrice,

OwnFeature

a
ANOVA

Model Sum of Squares df Mean Square F Sig.

b
1 Regression 36.568 6 6.095 56.482 .000

Residual 31.508 292 .108

Total 68.076 298

a. Dependent Variable: lnSales

b. Predictors: (Constant), CompFeature, CompDisp, lnOwnPrice, OwnDisplay, lnCompPrice, OwnFeature

a
Coefficients

Standardized

Unstandardized Coefficients Coefficients

Model B Std. Error Beta t Sig.

1 (Constant) 7.372 .073 101.461 .000

lnOwnPrice -.794 .198 -.186 -4.010 .000

lnCompPrice 2.195 .404 .252 5.432 .000

OwnDisplay .547 .048 .558 11.408 .000

OwnFeature .127 .047 .133 2.682 .008

CompDisp -.391 .045 -.406 -8.733 .000

CompFeature .070 .043 .073 1.642 .102

a. Dependent Variable: lnSales

1. What is the own price elasticity of demand for C-Cola? In other words, what % will the sales of
C-Cola change if the price of C-Cola is increased by 1%?

%∆!"#$% (∆!"#$%/!"#$%) !(!" !"#$% )

Price elasticity = %∆!"#$% = (∆!"#$%/!"#$%&'() = !(!" !"#$% )

Since the regression model is given as

ln 𝑆𝑎𝑙𝑒𝑠! = 𝛽! + 𝛽! ln 𝑂𝑤𝑛𝑃𝑟𝑖𝑐𝑒! + 𝛽! ln 𝐶𝑜𝑚𝑝𝑃𝑟𝑖𝑐𝑒! + 𝛽! 𝑂𝑤𝑛𝐷𝑖𝑠𝑝𝑙𝑎𝑦! + 𝛽! 𝑂𝑤𝑛𝐹𝑒𝑎𝑡𝑢𝑟𝑒!
+ 𝛽! 𝐶𝑜𝑚𝑝𝐷𝑖𝑠𝑝𝑙𝑎𝑦! + 𝛽! 𝐶𝑜𝑚𝑝𝐹𝑒𝑎𝑡𝑢𝑟𝑒! + 𝜀!

!(!" !"#$% )
We can get own price elasticity 𝛽! = !(!" !"#$%&'( ) = 𝛽! (ceteris paribus)

If the price of C-Cola increases by 1%, the sales of C-Cola will decrease by 0.794%, ceteris paribus.

2. What is the competitive price elasticity of demand for C-Cola? In other words, what % will the
sales of C-Cola change if the average price of competitors is increased by 1%?

Similar to the answer of Q1: If the average price of competitors increase by 1%, the sales of C-Cola
will increase by 2.195%, ceteris paribus.

3. What will be the sales (in liters) of C-Cola when it is displayed in end-of-aisle or at checkout
counters if the sales when C-Cola is not displayed is 1000 liters?

When 𝑂𝑤𝑛𝐷𝑖𝑠𝑝𝑙𝑎𝑦! = 0,

ln 𝑆𝑎𝑙𝑒𝑠! | 𝑂𝑤𝑛𝐷𝑖𝑠𝑝𝑙𝑎𝑦! = 0
= 𝛽! + 𝛽! ln 𝑂𝑤𝑛𝑃𝑟𝑖𝑐𝑒! + 𝛽! ln 𝐶𝑜𝑚𝑝𝑃𝑟𝑖𝑐𝑒! + 𝛽! 𝑂𝑤𝑛𝐹𝑒𝑎𝑡𝑢𝑟𝑒!
+ 𝛽! 𝐶𝑜𝑚𝑝𝐷𝑖𝑠𝑝𝑙𝑎𝑦! + 𝛽! 𝐶𝑜𝑚𝑝𝐹𝑒𝑎𝑡𝑢𝑟𝑒!

When 𝑂𝑤𝑛𝐷𝑖𝑠𝑝𝑙𝑎𝑦! = 1,

ln 𝑆𝑎𝑙𝑒𝑠! | 𝑂𝑤𝑛𝐷𝑖𝑠𝑝𝑙𝑎𝑦! = 1
= 𝛽! + 𝛽! ln 𝑂𝑤𝑛𝑃𝑟𝑖𝑐𝑒! + 𝛽! ln 𝐶𝑜𝑚𝑝𝑃𝑟𝑖𝑐𝑒! + 𝛽! + 𝛽! 𝑂𝑤𝑛𝐹𝑒𝑎𝑡𝑢𝑟𝑒!
+ 𝛽! 𝐶𝑜𝑚𝑝𝐷𝑖𝑠𝑝𝑙𝑎𝑦! + 𝛽! 𝐶𝑜𝑚𝑝𝐹𝑒𝑎𝑡𝑢𝑟𝑒!

Difference in sales = ln 𝑆𝑎𝑙𝑒𝑠! 𝑂𝑤𝑛𝐷𝑖𝑠𝑝𝑙𝑎𝑦! = 1 − ln 𝑆𝑎𝑙𝑒𝑠! 𝑂𝑤𝑛𝐷𝑖𝑠𝑝𝑙𝑎𝑦! = 0 = 𝛽!

!"#$%! | !"#$%&'()*! !! !"#$% | !"#$%&'()* !!

⇒ ln !"#$%! | !"#$%&'()*! !!
= 𝛽! ⇒ !"#$%! | !"#$%&'()*! !! = 𝑒 !!
! !

⇒ 𝑆𝑎𝑙𝑒𝑠! 𝑂𝑤𝑛𝐷𝑖𝑠𝑝𝑙𝑎𝑦! = 1 = 𝑒 !! ×𝑆𝑎𝑙𝑒𝑠! 𝑂𝑤𝑛𝐷𝑖𝑠𝑝𝑙𝑎𝑦! = 0 = 1000𝑒 !!

Therefore, the sales (in liters) of C-Cola when it is displayed in end-of-aisle or at checkout counters is
1000𝑒 !.!"# = 1728.061 𝑙𝑖𝑡𝑒𝑟𝑠
4. What will be the sales (in liters) of C-Cola when the competitor’s product is displayed in end-of-
aisle or at checkout counters if the sales of C-Cola without competitor’s product being displayed
is 1000 liters?

The sales (in liters) of C-Cola when the competitor’s product is displayed in end-of-aisle or at checkout
counters is 1000𝑒 !!.!"# = 676.3802 𝑙𝑖𝑡𝑒𝑟𝑠.

5. What will be the sales (in liters) of C-Cola when it is featured in the flyer if the sales of C-Cola
without it being featured in the flyer is 1000 liters?

The sales (in liters) of C-Cola when it is featured in the flyer is 1000𝑒 !.!"# = 1135.417 𝑙𝑖𝑡𝑒𝑟𝑠

6. What will be the sales (in liters) of C-Cola when the competitor’s product is featured in the flyer
if the sales of C-Cola without competitor’s product being featured is 1000 liters?

The sales (in liters) of C-Cola when the competitor’s product is featured in the flyer is 1000𝑒 .!" =
1072.508 𝑙𝑖𝑡𝑒𝑟𝑠.
The solutions on some student websites mentioned something about significance. Please ignore that,
since it doesn’t make much sense.

7. Among the independent variables, which of them has the highest impact on C-Cola’s sales, and
which of them has the lowest but significant impact on C-Cola’s sales?

This question is somewhat ambiguous and two answers are equally acceptable:
• Based on the standardized beta, Own Display has the highest and Own Feature has the lowest
(positive) significant impact on C-Cola’s sales.
• Based on the standardized beta, Own Display has the highest and Competitor Display has the
lowest (negative) significant impact on C-Cola’s sales.

Question 2
We reconsider study 5 from the article "Persuasion, interrupted: The effect of momentary interruptions
on message processing and persuasion" by Kupor and Tormala (2015). We have already analyzed this
study in the past week using ANOVA. This week we use linear regression. Download the dataset used
in week 2: KT2study5Qs3.xlsx

a) Create a new dummy variable for the interaction effect between “Momentary
interruption” and “Weak argument”. Then, estimate the following model:
𝐀𝐭𝐭𝐢𝐭𝐮𝐝𝐞 = 𝜷𝟎 + 𝜷𝟏 𝐌𝐨𝐦𝐞𝐧𝐭𝐚𝐫𝐲 + 𝜷𝟐 𝐖𝐞𝐚𝐤 + 𝜷𝟑 𝐌𝐨𝐦𝐞𝐧𝐭𝐚𝐫𝐲 ∗ 𝐖𝐞𝐚𝐤
 b) Interpret all coefficients: which effects are significant? In particular:
o What is the expected attitude of a participant who is momentarily interrupted
when the argument is weak?
o What is the expected attitude of a participant who is continuously interrupted
when the argument is strong?

Assuming a significance level of .05:

• Momentary interruption has a significant effect on sales (p-value = 0.000 < .05)
• Weak arguments does not have a significant effect on sales (p-value = 0.138 > .05)
• The interaction between momentary interruption and weak arguments has a significant impact
of sales (p-value = 0.038 < .05)

The expected attitude of a participant who is momentarily interrupted when the argument is weak =
4.304 + 1.396×1 + 0.528×1 – 1.046×1×1 = 5.18
The expected attitude of a participant who is continuously interrupted when the argument is strong =
4.304 + 1.396×0 + 0.528×0 + −1.046×0×0 = 4.304

c) Compare the results with the ANOVA output you obtained in exercise from the past
week. Comment on similarity and differences.

There’s more than one way to answer this question. The ANOVA output is given by:

Tests of Between-Subjects Effects

Dependent Variable: attitudes
Type III
Sum of Mean Partial Eta
Source Squares df Square F Sig. Squared
a
Corrected Model 51.784 3 17.261 5.494 .001 .078
Intercept 5009.004 1 5009.004 1594.33 .000 .891
9
momentaryinterrupti 38.106 1 38.106 12.129 .001 .058
on
weakarguments .001 1 .001 .000 .984 .000
momentaryinterrupti 13.676 1 13.676 4.353 .038 .022
on * weakarguments
Error 615.782 196 3.142
Total 5676.570 200
Corrected Total 667.566 199
a. R Squared = .078 (Adjusted R Squared = .063)

Notice that the significance levels correspond to those obtained by linear regression for the respective
factors and interaction term.

Secondly, we may compare the regression output with that shown in the histogram in the previous
week. Notice that expected attitude of a participant who is momentarily interrupted (red color) when
the argument is weak (right bars) is approximately 5.18 in the picture, which is the number we
obtained in part b. Alternatively, the expected attitude of a participant who is continuously interrupted
(blue color) when the argument is strong (left bars) is approximately 4.304, as obtained earlier.