Lab Assignment 14

# Lab Assignment 14 - Lab Assignment 14 1. The demand...

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Unformatted text preview: Lab Assignment 14 1. The demand function for wine is Q = a + a 1 Pw + a 2 Pb + a 3 Y + a 4 A + u, and the supply function for wine is Q = b + b 1 Pw + b 2 S + v, where all variables are in logarithm forms. Identify the endogenous and exogenous variables. Determine the identification of each equation by the order condition. Endogenous variables : Q and Pw Exogenous variables : Pb, Y, A, and S Demand function : just identified ( the number of exogenous variables omitted from the equation is equal to the number of endogenous variables on right hand side ) Supply function : Over identified ( the number of exogenous variables omitted from the equation is greater than the number of endogenous variables on the right hand side ) 2. Estimate the demand and supply by OLS and observe simultaneity bias. Submit the results. The SAS System 12:30 Thursday, April 15, 2010 1 The REG Procedure Model: demand Dependent Variable: l_q Number of Observations Read 20 Number of Observations Used 20 Analysis of Variance Sum of Mean Source DF Squares Square F Value Pr &gt; F Model 4 7.72520 1.93130 160.70 &lt;.0001 Error 15 0.18027 0.01202 Corrected Total 19 7.90547 Root MSE 0.10963 R-Square 0.9772 Dependent Mean 0.87271 Adj R-Sq 0.9711 Coeff Var 12.56161 Parameter Estimates Parameter Standard Variable DF Estimate Error t Value Pr &gt; |t| Intercept 1 -23.65122 3.91278 -6.04 &lt;.0001 l_pw 1 1.15826 0.28983 4.00 0.0012 l_pb 1 -0.27483 0.60766 -0.45 0.6575 l_y 1 3.21206 0.71400 4.50 0.0004 l_a 1 -0.60299 0.44974 -1.34 0.2000 The SAS System 12:30 Thursday, April 15, 2010 2 The REG Procedure Model: supply Dependent Variable: l_q Number of Observations Read 20 Number of Observations Used 20 Analysis of Variance Sum of Mean Source DF Squares Square F Value Pr &gt; F Model 2 7.61493 3.80746 222.78 &lt;.0001 Error 17 0.29054 0.01709 Corrected Total 19 7.90547 Root MSE 0.13073 R-Square 0.9632 Dependent Mean 0.87271 Adj R-Sq 0.9589 Coeff Var 14.97986 Parameter Estimates Parameter Standard Variable DF Estimate Error t Value Pr &gt; |t| Intercept 1 -15.56708 0.84802 -18.36 &lt;.0001 l_pw 1 2.14495 0.23855 8.99 &lt;.0001 l_s 1 1.38255 0.15451 8.95 &lt;.0001 In the demand function, the coefficient of Pw should be negative, but the result shows positive sign : simultaneity bias.simultaneity bias....
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## Lab Assignment 14 - Lab Assignment 14 1. The demand...

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