Suppose You Are Interested in Explaining the Number of Surfers

question 17

Essay

Suppose you are interested in explaining the number of surfers surfing at your favorite spot on a given day.After collecting data on the number of surfers,the height of the waves (in feet),the water temperature,and whether the day was a weekend on a sample of 92 days,you estimate the following marginal effects for the Poisson model $$\begin{array} { lll l} \text { Surfers } _ { i } = & 13.653 + 6.029 \text { Height } _ { i } +& 0.596 \text { Temperature } _ { i } +& 4.076 \text { Weekend } _ { i } \\&( 3.824 ) ( 2.137 ) & ( 0.202 ) & ( 1.382 )\end{array}$$
a)Why is OLS not appropriate in this circumstance? How does a Poisson model improve on OLS?
b)Discuss the results.
c)What assumption is necessary for Poisson to be the appropriate model? How would you test this assumption? If this assumption fails,what alternative model could you estimate?

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Definitions:

Consumer Surplus

The gap between what consumers are ready and able to expend for a good or service and what they actually spend.

Price Ceiling

A legally imposed limit on the price that can be charged for a good or service, typically set below the equilibrium price.

Excess Demand

A situation where the quantity demanded of a good or service exceeds the quantity supplied at a particular price, often leading to upward pressure on prices.

Consumer Surplus

The disparity between the cumulative amount consumers are willing to pay for a product or service and the amount they actually pay.