A researcher is interested in estimating the supply function of an online car rental service provider as a function of its average price (Price, measured by the average per kilometre price charged for...

A3


Extracted text: A researcher is interested in estimating the supply function of an online car rental service provider as a function of its average price (Price, measured by the average per kilometre price charged for the month of October, 2017). He has data on the price charged and the number of cars available on the road for rent, (Car), for the 200 cities in the U.S. in which the provider operates. However, given that there is simultaneous causality between Price and Car due to the interactions between demand and supply, the supply function cannot be estimated consistently by an OLS regression of Car on Price. He, therefore, uses Income (measured by the per capita GDP of a given city in the U.S. for 2017) as an instrument which satisfies the two conditions of instrument validity. He uses the two stage least squares (TSLS) estimator of the coefficient on Price which enables him to estimate the supply function. Suppose, the sample covariance between Car and Income, SCar, Income is 1.45, and the sample covariance between Price and Income, Sincome, Price is 2.45. A TSLS Let B1 be the population slope coefficient on price and Bi be the two stage least squares (TSLS) estimator of B1. TSLS The value of ß, will be (Round your answer to two decimal places).