Retail Price Regular Unleaded 1.55 You are interested in looking at how competition affects gas prices, where you think that if a gas station has more competitors nearby, it will tend to have lower prices. To test this, you decide to use a natural experiment in which a chain of gas stations ("Thrifty") suddenly closed. This closure occurred between June and October of 2012, and meant that gas stations that were previous close to a Thrifty station experienced less competition than before. On the other hand, those stations that were not close to a Thrifty station did not experience any change in competition. You decide to use a differences in differences design, in which gas stations located near a Thrifty station at the start of 2012 are the treatment group and those that were not located near a Thrifty at the start of 2012 are the control group. You look at how prices change before and after the exit of Thrifty. This is plotted in the below graph, where the solid line represents the average price of stations that were near a Thrifty at the start of 2012 and the dashed line represents stations that were not near a Thrifty at the start of 2012. 1.45 1.35 1.25 A -Competed with Thrifty -All Other Stations 1.15 December February June October December True or false: based on the trends observed in the period prior to the exit of Thrifty, this setting appears to be a good candidate for using a differences-in-differences approach.

Retail Price Regular Unleaded 1.55 You are interested in looking at how competition affects gas prices, where you think that if a gas station has more competitors nearby, it will tend to have lower prices. To test this, you decide to use a natural experiment in which a chain of gas stations ("Thrifty") suddenly closed. This closure occurred between June and October of 2012, and meant that gas stations that were previous close to a Thrifty station experienced less competition than before. On the other hand, those stations that were not close to a Thrifty station did not experience any change in competition. You decide to use a differences in differences design, in which gas stations located near a Thrifty station at the start of 2012 are the treatment group and those that were not located near a Thrifty at the start of 2012 are the control group. You look at how prices change before and after the exit of Thrifty. This is plotted in the below graph, where the solid line represents the average price of stations that were near a Thrifty at the start of 2012 and the dashed line represents stations that were not near a Thrifty at the start of 2012. 1.45 1.35 1.25 A -Competed with Thrifty -All Other Stations 1.15 December February June October December True or false: based on the trends observed in the period prior to the exit of Thrifty, this setting appears to be a good candidate for using a differences-in-differences approach.