MGSC 372 Lecture Notes - Lecture 6: Multicollinearity, Minitab, Dependent And Independent Variables

• School: McGill University
• Department: Management Science
• Course: MGSC 372
• Professor: Brian Smith

Document Summary

For this example, we conclude that there is a significant interaction between age and numbid. This means that the response of price to age depends on the number of bidders. We see that more bidders always results in a higher auction price. Furthermore, as the number of bidders increases, the rate of increase of price as a function of age also increases. In practical terms, this implies that the antique dealer should reserve older clocks for larger auctions, as each extra year of age results in a large increase in price when there is a larger number of bidders. Assume a clock aged 150 years and an auction with 5 bidders. If we ignore interaction in this model, the predicted price will be seriously overestimated. If the interaction term (cid:2871)=(cid:2869)(cid:2870) in the model. Is significant, you should not conduct t-tests on the coefficients of the first-order terms (cid:2869) and (cid:2870).