Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Microeconomics Expert

This problem explores whether U.S. airline companies use their market power by charging higher air fares. The data consists of average fares on the most popular routes (e.g., Boston-Chicago) for the year 2000. Below you will find OLS estimates of a regression relating average airfare in city-pair ? to several explanatory variables:

lprice=4.4 - 0.04 dist - 0.06pass - 0.8 mkts - 0.4 mkts^2
(0.1) (0.02) (0.01) (0.3) (0.2) ()= SE for each variable

where lprice is the logarithm of the average fare on the given route, dist is distance of the route (in thousands of miles with a range running from 0.1 to 3), pass is average number of passengers per day (in thousands, with a range 0.01 to 8), and mkts is the market share of the biggest airline carrier on the given route (the average is 0.3, i.e., 30%). Heteroskedasticity-robust standard errors are given in parentheses.

a) Based on the OLS estimations, and assuming the OLS assumptions hold, what is the marginal effect of the market share of the largest carrier on prices evaluated at the average of that market share?

b) We are also interested to know how precisely this effect is measured. If you had the data, how would you go about finding the standard error of this estimate?

c) Does your answer in (a) support the hypothesis that firms use their market power to charge higher prices?

d) How would you test whether market power is used the same way on more popular and less popular routes? (prepare down the model and the hypotheses, and describe the test procedure.)

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M938757

Have any Question? 


Related Questions in Microeconomics

1 the crr model european claimconsider the crr model of

1. The CRR model: European claim. Consider the CRR model of stock price S with T periods and parameters d (a) Consider the European claim X with expiry date T and the payoff X = g(S r ) = 1/S T 1[k,∞)(S T ). Show that th ...

Assignmentxyz company enters into a contract with mary to

Assignment XYZ Company enters into a contract with Mary to landscape Ben's yard, using None Nursery to supply trees and buses. Kate owns the lot next to Ben's property. The landscaping is a gift from Mary to Ben, who is ...

Introduction to economic evaluation of health promotion

Introduction to Economic Evaluation of Health Promotion Interventions Assignment Evaluating Cost-effectiveness using Markov cohort models: The HPV case The goal of this assignment is to provide students with applied prac ...

Leasing equipmentfor catherine owens onlybullsuggest one

Leasing Equipment For Catherine Owens Only • Suggest one key economic factor that motivates leasing as an option in acquiring an asset. Explain the potential asymmetries that may exist where leasing may be beneficial to ...

Assignment emerging economies and Assignment: Emerging Economies and Globalization

Assignment: Emerging Economies and Globalization Background Markets in developed economies are approaching saturation level. Therefore, MNCs are searching for new untapped markets in emerging countries such as India and ...

Need someone to help with the belowthe theory of market

Need someone to help with the below The theory of market economies emphasizes freedom of choice and limited government intervention. The classic argument for government intervention is market failure - the inability of t ...

Micro economics paperyou have been given the responsibility

Micro Economics Paper You have been given the responsibility of working with your organization's CEO to do a competitive market analysis of the potential success of one of their existing products. Select your organizatio ...

Assignmentin the article at the beginning of the readings

Assignment In the article at the beginning of the readings book, Aronson talks about Social Psychology as a leap of faith, and about the imperfect nature of social psychological experiments (which is true of science in a ...

Discussion questionsi need 3 different discussion to be

Discussion Questions I need 3 different Discussion to be answered, by replying to what the student wrote. I'll forward the Discussions as we agree to shake hands. Word counts asnwer question no more than 100 words if mor ...

Samsung smartphone manufacturer vs google inc search engine

Samsung (smartphone manufacturer) Vs. Google Inc. (search engine) - economic and financial analysis Objectives: • Assess and compare the market types of Google Inc.(as a search engine) and Samsung • Determine the various ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro