ECON 584
Fall 2024
Homework #4
Due Oct 7 before the class
1. Review the Bulgari and RC hotel (AYANA Resort) by visiting their respective websites. Describe any stylized differences that are apparent to you in a brief fashion. How many rooms and villas are at each property at present? (1 pt)
2. Discuss two weaknesses of the Owsley report (main and supplemental). Discuss two weaknesses of the Dubin report (main and supplemental). (4 pts)
3. Locate data for tourist arrivals to Bali since 2005. Cite a website for this. (1 pts)
4. Could exchange rate fluctuations affect the regression models offered by Dr. Dubin in the Bali case? Hint: if exchange rate fluctuations were not included in the regression models by Dubin (or by Owsley), should they have been included and how should they have been included? (4 pts)
5. Suppose that true model is
The model Mr. Owsley estimated was
where is the number of tourist arrivals to Bali. is the month number in Mr. Owsley’s reports. It acts like “trend” in Canada Post and is essentially the observation number i. (Subscript. ovb here refers to omitted variable bias)
If we ignore and other factors and a simple version of true model is and then we can get
is the bias, which equals to the coefficient of regression of x2 on x1.This is the formula for omitted variable bias; you may refer to https://en.wikipedia.org/wiki/Omitted-variable_bias for more details.
In above equation, was omitted when Mr. Owsley estimated the model. Please show how the omitted variable would influence the estimate of the coefficient of . (Hint: Recall the trend and hotel capacity are positively correlated.) (extra credits: 3 pts)