The Results below show the output of the following model: ?=?0+?1?1+?2?2+? Coefficient St. Error t-ratio Intercept 10.492 0.6655 15.77 ?1 0.0154 0.1889 0.08 ?2 0.1353 0.1889 0.72 Observations 100 ?2 0.985 Correlation matrix: X1 X2 X1 1 X2 0.950 1 Instructions: a. The above results show that the model has the problem of multicollinearity, what are the indicators of multicollinearity that can be identified from these results? b. What are the solutions to rectify multicollinearity?

The Results below show the output of the following model: ?=?0+?1?1+?2?2+? Coefficient St. Error t-ratio Intercept 10.492 0.6655 15.77 ?1 0.0154 0.1889 0.08 ?2 0.1353 0.1889 0.72 Observations 100 ?2 0.985 Correlation matrix: X1 X2 X1 1 X2 0.950 1 Instructions: a. The above results show that the model has the problem of multicollinearity, what are the indicators of multicollinearity that can be identified from these results? b. What are the solutions to rectify multicollinearity?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter4: Estimating Demand

Section: Chapter Questions

Problem 1.4CE

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