Your Textbook Gave an Example of Attempting to Estimate the Demand

question 18

Essay

Your textbook gave an example of attempting to estimate the demand for a good in a
market, but being unable to do so because the demand function was not identified.Is this
the case for every market? Consider, for example, the demand for sports events.One of
your peers estimated the following demand function after collecting data over two years
for every one of the 162 home games of the 2000 and 2001 season for the Los Angeles
Dodgers. $$\begin{array} { l } \widehat { \text { Attend } } = 15,005 + 201 \times \text { Temperat } + 465 \times \text { DodgNetWin } + 82 \times \text { OppNetWin } \\\quad\quad\quad\quad\quad( 8,770 ) ( 121 ) \quad\quad\quad\quad\quad\quad\quad(169) \quad\quad\quad\quad\quad\quad\quad\quad(26) \\\\+ 9647 \times \text { DFSaSu } + 1328 \times \text { Drain } + 1609 \times \text { D } 150 m + 271 \times \text { DDiv } - 978 \times \text { D2001; } \\\text { (1505) } \quad\quad\quad\quad\quad\quad\text { (3355) } \quad\quad\quad\quad\text { (1819) }\quad\quad\quad\quad ( 1,184 )\quad\quad\quad \quad ( 1,143 ) \\\\R ^ { 2 } = 0.416 , S E R = 6983 \\\end{array}$$ Where Attend is announced stadium attendance, Temperat it the average temperature on
game day, DodgNetWin are the net wins of the Dodgers before the game (wins-losses),
OppNetWin is the opposing team's net wins at the end of the previous season, and
DFSaSu, Drain, D150m, Ddiv, and D2001 are binary variables, taking a value of 1 if the
game was played on a weekend, it rained during that day, the opposing team was within a
150 mile radius, plays in the same division as the Dodgers, and during 2001, respectively.
Numbers in parenthesis are heteroskedasticity- robust standard errors.
Even if there is no identification problem, is it likely that all regressors are uncorrelated
with the error term? If not, what are the consequences?

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Definitions:

Credit Card

A financial instrument that allows the cardholder to borrow funds from a pre-approved limit to pay for goods and services.

Money Supply

The entire sum of monetary holdings accessible in an economy at a certain period.

Travelers Checks

Preprinted, fixed-amount checks designed to allow the person signing them to make payments or exchange for local currency, used mainly by travelers to protect against theft or loss.

M1 Balance

The most liquid components of the money supply, including physical currency, demand deposits, and other assets that can quickly be converted to cash.