You are in charge of pricing for a California wine company.Because nearly 90% of U.S. wines are produced in California, youthink that California wines might be perceived differently fromthose produced in other states, thus affecting the price. Youdecide to see how both wine rating and whether or not the wine isfrom California affect the pricing of wines in the U.S.
For this question, you will need to download theWine Rating Data and then use the data analysistool pack in Excel to run a regression. Note that for the dummyvariable, you will need to use an IF command to make thatcolumn.
https://arizona.grtep.com/core/uploadfiles/components/287971/files/Wine%20Rating%20Data.xlsx(Wine Data)
Run a regression to estimate the following equation.
Price = ?0+?1Rating + ?2California + ?3(Rating×California) +?
“California” is a dummy variable that equals 1 if the wine isfrom California. Round your answers to 2 decimalplaces.
Priceˆ= ________ + ________ Rating? _______ California+ _______Rating?California
What was the reported R2 of the model? Roundyour answer to 4 decimal place.
What would be the difference in predicted price of two winesthat both have a rating of 93, but one is produced in Californiaand one is produced in Oregon? Round your answers to 2decimal places.
Hint, it might be helpful to write out the equation for whenthe California dummy variable equals 0 and then for when it equals1 like we did in class for other dummy variables.
The California wine is $_______ higher than the Oregon wine.
Based on the model you estimated, at what rating do Californiawines become more expensive than wines from other states? Roundyour answers to 2 decimal places.
