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An econometrician estimates the relationship q = α1 + α1p1 + α2p2 where q is the demand for a product, α1 is the effect on that demand of a unit change in the price p1 of the product itself, and α2 is the effect of a unit change in the price p2 of a rival product

Economics Jan 03, 2022

An econometrician estimates the relationship q = α1 + α1p1 + α2p2 where q is the demand for a product, α1 is the effect on that demand of a unit change in the price p1 of the product itself, and α2 is the effect of a unit change in the price p2 of a rival product. It is found that α1 and α2 are significantly different from zero, but insignificantly different from each other. What does this suggest about the appropriate model for analyzing the market for these products, assuming there is free entry into that market?    

 

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