Modeling Exercises

Condominium Sales

A condominium developer wishes to understand the relationship between the sale price (at auction) of condominium units in a new seaside building complex, and various characteristics of the units. He collects data on the variables Y (sale price), X1 (height of the unit within the building, measured in floors), X2 (distance of the unit from the elevator), and X3 (1 if the unit has a sea view, 0 otherwise).

  1. What additional variable should he include in his regression model, if he believes that purchasers prefer low units on the ocean-view side of the building, and high units on the side which faces inland?
  2. What additional variable should he include in his regression model, if he believes that units close to the elevator (convenient) and far from the elevator (private) are valued more highly than units in-between?

Hotel Energy Usage

High temperature is more uncomfortable if humidity is also high.

  1. What variable would you add to the regression model, in order to study whether this phenomenon affects electricity consumption?
  2. If most electricity consumption comes from the use of air conditioning in the guest rooms, what sign would you expect the coefficient of this new variable to have?
  3. If the hotel was located in Chicago, and used electricity for both air conditioning and heat, what variable would you add to the regression model?
  4. What sign would you expect this new variable to have?

Soccer Attendance

  1. What new variable(s) would you include in the regression model if you believe that advertising games against strong opponents is more effective than advertising games against weak opponents?
  2. What new variable(s) would you include in the regression model if you believe that there is least public interest in games against mediocre opponents? (The fans like to watch a good opponent play; they also like to see your team kill a weak opponent.)
  3. What new variable(s) would you include in the regression model if games are scheduled for either Friday, Saturday, or Sunday, and you believe that attendance depends on the day a game is played?