Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 17, Problem 17.3IP
To determine
The difference-in-difference method.
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To test the effectiveness of a two Web advertising agencies, you increase your ad purchase with agency A by 50% without changing your purchase through agency B. The referrals to your website from agency A increased by only 34% but the referrals from agency B fell by 21%. Why might the difference-in-difference estimate of the referrals per dollar through agency A be biased?
The residential division of Prism’s high-speed Internet service uses one advertising agency, while its commercial division uses another. Two analysts, Andy and Brad, are asked to test and evaluate the effectiveness of the two agencies. Andy proposes an A/B test that compares the click-through rates per ad for the two agencies. Brad proposes a difference-in-dif-ference test in which the budgets for both agencies are increased by 50%, and the percent change in click-through rates is compared.
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Chapter 17 Solutions
Managerial Economics: A Problem Solving Approach
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