The Baltic Shipping Company, Denmark, is estimating the delivery time (Y, in minutes) for an order made to their company. The order needs to be shipped to Brofjorden (X₁), Norrköping (X₂), Stockholm (X₃). The company takes into account the total number of parcels included in the order and the age of van that will be used for delivery.
a. Justify whether the following model is suitable for the company for dummy variable model analysis.)

where
X₄ = Total number of parcels
X₅ = Age of the van
b. For a model that can be estimated is as follows:

where the excluded category is Stockholm, determine the constants for each region in the model.

Transcribed Image Text:

Y = Bo + B₁X₁ + B₂X₂ + B3X3 + B4X4 + B5X5 + ε