A marketing manager has developed a regression model to predict quarterly sales of his company’s mid-weight microfiber jackets based on price and amount spent on advertising. An intern suggests that he include indicator (dummy) variables for each quarter.
a) How would you code the variables? (How many dummy variables do you need? What values would they have?)
b) Why does the intern’s suggestion make sense?
c) Do you think a regression with the indicator variables would model jacket sales better than one without those predictors?