Mid City Regression Analysis

In: Business and Management

Submitted By npomms
Words 449
Pages 2
Assignment 2
Mid City Regression Analysis

November 6, 2012

Question 1 – Do buyers pay a premium for a brick house, all else being equal?
According to Model 1 above, a premium indeed is paid for a brick house if no other factor is considered. The reference being of a non-brick house shows an average price of $121,958 for house of all sizes, all locations and any number of rooms and bedrooms. A brick house, for all of the same criteria shows a premium of $25,810 being paid.
Question 2 – Is there a premium for a house in neighborhood 3, all else being equal?
Going by Model 2 above, a premium can indeed be observed for houses purchased in Neighborhood 3. Setting neighborhood 3 as the reference point, we observe an average house price of $159,294 with houses in the neighborhoods 1 & 2 showing average prices being $49,140 & $34,063 lower, respectively.
Question 3 – Is there an extra premium for a brick house in neighborhood 3, in addition to the usual premium for a brick house?
According to model 3, a premium can indeed be observed for brick houses in neighborhood 3 as opposed to brick houses in all other neighborhoods. We test this by adding an interaction variable of brick houses within neighborhood 3 and testing this against the reference which is a brick house and a house within neighborhood 3. With these reference parameters set, we get an average price for the reference group of $148,230 & a premium for the houses meeting the interaction variable criteria (brick house within neighborhood 3). We then observe a premium of $11,989 for houses which meet this criteria .
Question 4 – For purposes of estimation and prediction, could neighborhoods 1 and 2 be collapsed into a single “older” neighborhood?
In testing whether houses in group 1 & 2 were significantly different enough to be divided into two separate groups, we regress against all…...

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