PROBLEM #2

A new online auction site specializes in selling automotive parts for classic cars. The
founder of the company believes that the price received for a particular item increases
with its age (i.e., the age of the car on which the item can be used in years) and with the
number of bidders. The Excel multiple regression output is shown below.

Summary measures
Multiple R 0.8391
R-Square 0.7041
Adj R-Square 0.6783
StErr of Estimate 148.828
ANOVA Table
Source df SS MS F p-value
Explained 2 1212039.4 606019.7 27.3601 0.0000
Unexplained 23 509444.9 22149.8

Regression coefficients
Coefficient Std Err t-value p-value
Constant -1242.99 331.204 -3.7529 0.0010
Age of Item 75.017 10.65 7.0459 0.0000
Number of Bidders 13.973 10.44 1.3380 0.1940

(A) Estimate a multiple regression model for the data.

(B) Which of the variables in this model have regression coefficients that are
statistically different from 0 at the 5% significance level?

(C) Given your findings in (B), which variables, if any, would you choose to
remove from the model estimated in (A)? Explain your decision.