Endogenous variables... Need help! (SPSS beginner)

[Bella Riley]

I am running a regression on vehicle demand (vehicle registrations in 2011) with the following independent variables:
Assembly location
Price
Alloy wheels*
Transmission*
Number of seats
Number of doors
Driven wheels (front, rear or 4x4)
Maximum speed
0-62mph
Fuel type*
Fuel capacity
CO2 emissions
Vehicle tax
Insurance group
Customer ratings
Air conditioning*
Adult safety
Child safety
Cruise control*
Alarm*
Climate control*
Rear parking sensor*
Central locking*
Leather interior*
BHP

The paper is looking at consumer preferences, in particular how they consider the origin of the vehicles they're looking to buy. Do consumers want a domestically produced car or do they not care?

I have a few queries and guidance with any of them would be more than appreciated as I am really struggling- despite hours of research. (I have taken only one econometrics course whilst at University and so, have very little knowledge on such matters).

1. As price is endogenous, how do I control for this? I was given a little pointer and told to run a separate regression with the remaining independent variables and price as the dependent variable but I wasn't sure how this would help? I know that given there is more than one endogenous variable, it is often preferred to tackle the causal questions separately.
Have also looked into running a two-stage least-squares regression whereby lagged price is used to calculate a proxy for price that is uncorrelated with the measurement errors of demand (registrations). This proxy could then be substituted for the original price variable and estimated again?
2. Customer review scores are also endogenous so I'm not sure how to control for this? Again, received a little pointer from a friend who mentioned something about reduced form regressions to run a review score model but I'm not sure what I'd do next?

Once again, ANY help on this would really be appreciated.

(I've read so many papers but given my lack of knowledge on the subject, I'm finding it quite difficult to work my way round what they're saying so figured this could help!)

On a lighter note- was thinking of titling the paper something along the lines of:
Consumer Perceptions: Does the provenance of vehicles affect an individual's purchasing journey.

Again, clutching at straws here and it probably isn't funny in the slightest (I doubt the pun is even noticeable). Should I steer clear of such titles? (Haha, another pun!!)

[Jon K Peck]

If you believe price and customer ratings are endogenous, you need to read up on simultaneous equation models.  In SPSS Statistics, such models can be estimated with 2SLS.  Or you could build a model with Amos.


Jon Peck (no "h") aka Kim
Senior Software Engineer, IBM
[hidden email]
phone: [phone]




From:        JJEcon <[hidden email]>
To:        [hidden email],
Date:        04/13/2013 07:24 AM
Subject:        [SPSSX-L] Endogenous variables... Need help! (SPSS beginner)
Sent by:        "SPSSX(r) Discussion" <[hidden email]>

---

I am running a regression on vehicle demand (vehicle registrations in 2011)
with the following independent variables:
Assembly location
Price
Alloy wheels*
Transmission*
Number of seats
Number of doors
Driven wheels (front, rear or 4x4)
Maximum speed
0-62mph
Fuel type*
Fuel capacity
CO2 emissions
Vehicle tax
Insurance group
Customer ratings
Air conditioning*
Adult safety
Child safety
Cruise control*
Alarm*
Climate control*
Rear parking sensor*
Central locking*
Leather interior*
BHP

The paper is looking at consumer preferences, in particular how they
consider the origin of the vehicles they're looking to buy. Do consumers
want a domestically produced car or do they not care?

I have a few queries and guidance with any of them would be more than
appreciated as I am really struggling- despite hours of research. (I have
taken only one econometrics course whilst at University and so, have very
little knowledge on such matters).

1. As price is endogenous, how do I control for this? I was given a little
pointer and told to run a separate regression with the remaining independent
variables and price as the dependent variable but I wasn't sure how this
would help? I know that given there is more than one endogenous variable, it
is often preferred to tackle the causal questions separately.
Have also looked into running a two-stage least-squares regression whereby
lagged price is used to calculate a proxy for price that is uncorrelated
with the measurement errors of demand (registrations). This proxy could then
be substituted for the original price variable and estimated again?
2. Customer review scores are also endogenous so I'm not sure how to control
for this? Again, received a little pointer from a friend who mentioned
something about reduced form regressions to run a review score model but I'm
not sure what I'd do next?

Once again, ANY help on this would really be appreciated.

(I've read so many papers but given my lack of knowledge on the subject, I'm
finding it quite difficult to work my way round what they're saying so
figured this could help!)

On a lighter note- was thinking of titling the paper something along the
lines of:
Consumer Perceptions: Does the provenance of vehicles affect an individual's
purchasing journey.

Again, clutching at straws here and it probably isn't funny in the slightest
(I doubt the pun is even noticeable). Should I steer clear of such titles?
(Haha, another pun!!)



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[Ryan]

Please define endogenous and explain how price, and not preference to purchase a domestic car, fits that definition.

Ryan

On Apr 13, 2013, at 9:23 AM, JJEcon <[hidden email]> wrote:

> I am running a regression on vehicle demand (vehicle registrations in 2011)
> with the following independent variables:
> Assembly location
> Price
> Alloy wheels*
> Transmission*
> Number of seats
> Number of doors
> Driven wheels (front, rear or 4x4)
> Maximum speed
> 0-62mph
> Fuel type*
> Fuel capacity
> CO2 emissions
> Vehicle tax
> Insurance group
> Customer ratings
> Air conditioning*
> Adult safety
> Child safety
> Cruise control*
> Alarm*
> Climate control*
> Rear parking sensor*
> Central locking*
> Leather interior*
> BHP
>
> The paper is looking at consumer preferences, in particular how they
> consider the origin of the vehicles they're looking to buy. Do consumers
> want a domestically produced car or do they not care?
>
> I have a few queries and guidance with any of them would be more than
> appreciated as I am really struggling- despite hours of research. (I have
> taken only one econometrics course whilst at University and so, have very
> little knowledge on such matters).
>
> 1. As price is endogenous, how do I control for this? I was given a little
> pointer and told to run a separate regression with the remaining independent
> variables and price as the dependent variable but I wasn't sure how this
> would help? I know that given there is more than one endogenous variable, it
> is often preferred to tackle the causal questions separately.
> Have also looked into running a two-stage least-squares regression whereby
> lagged price is used to calculate a proxy for price that is uncorrelated
> with the measurement errors of demand (registrations). This proxy could then
> be substituted for the original price variable and estimated again?
> 2. Customer review scores are also endogenous so I'm not sure how to control
> for this? Again, received a little pointer from a friend who mentioned
> something about reduced form regressions to run a review score model but I'm
> not sure what I'd do next?
>
> Once again, ANY help on this would really be appreciated.
>
> (I've read so many papers but given my lack of knowledge on the subject, I'm
> finding it quite difficult to work my way round what they're saying so
> figured this could help!)
>
> On a lighter note- was thinking of titling the paper something along the
> lines of:
> Consumer Perceptions: Does the provenance of vehicles affect an individual's
> purchasing journey.
>
> Again, clutching at straws here and it probably isn't funny in the slightest
> (I doubt the pun is even noticeable). Should I steer clear of such titles?
> (Haha, another pun!!)
>
>
>
> --
> View this message in context: http://spssx-discussion.1045642.n5.nabble.com/Endogenous-variables-Need-help-SPSS-beginner-tp5719447.html
> Sent from the SPSSX Discussion mailing list archive at Nabble.com.
>
> =====================
> To manage your subscription to SPSSX-L, send a message to
> [hidden email] (not to SPSSX-L), with no body text except the
> command. To leave the list, send the command
> SIGNOFF SPSSX-L
> For a list of commands to manage subscriptions, send the command
> INFO REFCARD

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[Justin Blehar]

Hi,

If this helps you at all here are some rough guidelines to help you with your model (if that's what your working on):

Exogenous variables can roughly be understand as your independent variables and Endogenous variables can be thought of as your dependent variables. Your exogenous variables can either directly or indirectly influence your endogenous variables. (Byrne, B. M.)

I'm rather new at this myself but I think (and may be wrong) that you are attempting to create a model and test it using structural equation modeling (SEM). This can be done via AMOS, LISREL EQS, etc... I know that as a beginner myself things can get really convoluted and confusing. I would recommend slowing things down and determining exactly what it is your hoping to accomplish. From there you can determine the best way to go about doing that via your analysis. If you decide to go with SEM based on your needs and dataset than I would highly recommend Barbara M. Byrne's book on SEM (she has different books depending on the software your using).

It also may just be a terminology problem but you mention regression, LSM, independent, and endogenous in your query but not in a way that makes much sense (to me anyways).

Hope this helps you a little, I've been there (and still am there :)

P.S..if you go with SEM in the end you don't want to post your questions here.

V/R
Justin

---

From: SPSSX(r) Discussion [[hidden email]] on behalf of Jon K Peck [[hidden email]]
Sent: Saturday, April 13, 2013 10:28 AM
To: [hidden email]
Subject: Re: Endogenous variables... Need help! (SPSS beginner)

If you believe price and customer ratings are endogenous, you need to read up on simultaneous equation models.  In SPSS Statistics, such models can be estimated with 2SLS.  Or you could build a model with Amos.


Jon Peck (no "h") aka Kim
Senior Software Engineer, IBM
[hidden email]
phone: [phone]




From:        JJEcon <[hidden email]>
To:        [hidden email],
Date:        04/13/2013 07:24 AM
Subject:        [SPSSX-L] Endogenous variables... Need help! (SPSS beginner)
Sent by:        "SPSSX(r) Discussion" <[hidden email]>

---

I am running a regression on vehicle demand (vehicle registrations in 2011)
with the following independent variables:
Assembly location
Price
Alloy wheels*
Transmission*
Number of seats
Number of doors
Driven wheels (front, rear or 4x4)
Maximum speed
0-62mph
Fuel type*
Fuel capacity
CO2 emissions
Vehicle tax
Insurance group
Customer ratings
Air conditioning*
Adult safety
Child safety
Cruise control*
Alarm*
Climate control*
Rear parking sensor*
Central locking*
Leather interior*
BHP

The paper is looking at consumer preferences, in particular how they
consider the origin of the vehicles they're looking to buy. Do consumers
want a domestically produced car or do they not care?

I have a few queries and guidance with any of them would be more than
appreciated as I am really struggling- despite hours of research. (I have
taken only one econometrics course whilst at University and so, have very
little knowledge on such matters).

1. As price is endogenous, how do I control for this? I was given a little
pointer and told to run a separate regression with the remaining independent
variables and price as the dependent variable but I wasn't sure how this
would help? I know that given there is more than one endogenous variable, it
is often preferred to tackle the causal questions separately.
Have also looked into running a two-stage least-squares regression whereby
lagged price is used to calculate a proxy for price that is uncorrelated
with the measurement errors of demand (registrations). This proxy could then
be substituted for the original price variable and estimated again?
2. Customer review scores are also endogenous so I'm not sure how to control
for this? Again, received a little pointer from a friend who mentioned
something about reduced form regressions to run a review score model but I'm
not sure what I'd do next?

Once again, ANY help on this would really be appreciated.

(I've read so many papers but given my lack of knowledge on the subject, I'm
finding it quite difficult to work my way round what they're saying so
figured this could help!)

On a lighter note- was thinking of titling the paper something along the
lines of:
Consumer Perceptions: Does the provenance of vehicles affect an individual's
purchasing journey.

Again, clutching at straws here and it probably isn't funny in the slightest
(I doubt the pun is even noticeable). Should I steer clear of such titles?
(Haha, another pun!!)



--
View this message in context: http://spssx-discussion.1045642.n5.nabble.com/Endogenous-variables-Need-help-SPSS-beginner-tp5719447.html
Sent from the SPSSX Discussion mailing list archive at Nabble.com.

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