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# The le concatecdet contains 56 observations on variables related to sales of cocaine power in northeastern Califonia ever the period 1984 - 1991.

The ﬁle concatecdet contains 56 observations on variables related to sales of cocaine
power in northeastern Califonia ever the period 1984 - 1991. These data are a subset
of these used in the study Caulkins, J.P. and R. Padrnan (1993), “Quantity Discounts
and Quality Premia for Illicit Drugs&quot;, Journal of the American Statistical Association,
88, &quot;MS-75?. The variable description is as below: Variable Description price
quaint
qual
trend price per gram in USD for a cocaine sale number of grams of cocaine in a given sale quality of the cocaine expressed as percentage purity
a time variable with 1984 = 1 up to 1991 = 8 Consider the regression model in the form: 1. IT.“ price = J31 + 521314!th + ﬁSQHﬂ-I + ﬁqtrcnd + s [Model 1) Based on economic intuition, what signs would you expect on the coefﬁcients .82, 53. and #31? . Inspect the data in the ﬁle concerns-dot using summary statistics (i.e. number of observation, mean, std.dev, min and max], a correlation matrix and a scatter plot matrix for all four variables {eg http : Nwww . sthda . comfenglishz’wikif
scatter—plot—matriees—r—base—graphs} . Estimate Model 1 and report the estimation results together with a suitable col— lection of summary statistics. . Hmv well does the model ﬁt the data? Explain in a descriptive sentence. . Interpret the estimated coefﬁcient of guest, taking care with the units of measure&quot; ment. . Construct a 90% conﬁdence interval estimate for the coefﬁcient of onset. Interpret the result in a sentence. It is claimed that the greater the number of sales, the higher the risk of getting
caught. Thus, sellers are willing to accept a lower price if they can make sales in
larger quantities. Test this hypothesis at the 5% signiﬁcant level. . Test the hypothesis that the quality of cocaine has no inﬂuence on price against the alternative that a premium is paid for better-quality cocaine. What is the expected annual change in the cocaine price based on the model
regression results? Can you suggest why price might be changing in this direction?

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