Posted: November 14th, 2015

Economic consulting and managerial economics

Economic consulting and managerial economics

1.    Explain the product life-cycle model as developed by Bass. Explain how a PLC model is estimated. What

data is employed in the estimation of the Bass model?

2.    Using the Kodak Polaroid data set (aggr.sav or aggr.txt) I’d like you to:
(a)    Show the product life-cycle for instant cameras (i.e., produce a graph of sales over time remembering

to remove the seasonal component and to show annual sales instead of bimonthly sales.
(b)    Estimate a Bass type product life-cycle model for this data. Does the product life cycle fit the data

in your opinion? Hint: Please remember to remove seasonality during estimation. Also, Kodak and Polaroid

instant camera units sold are variables “ku” and “pu” respectively. You may create a total units sold as

instant = ku + pu. Seasonal dummies are included in the data file.
(c)    Optional for extra credit: Create a demand model using other factors included in the data set. Compare

the fit of the Bass model to a simple demand model. Do you prefer one to the other?

3.    Briefly explain the Polaroid econometric model of camera demand. (Hint: limit yourself to less than

one page!) What is the relationship between the PLC and Polaroid models?

4.    What are some of the variants of the simple Bass model? What are the limitations of the Bass model?

5.    What is a reservation value? How are reservation values used in economic theory? Can reservation values be measured?

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