After having inspected the regression of Sales (in $1000) on Price (in $) reported in the text, the product manager makes the following observation: "The stores that lower the price of Slippery Soap in a given week tend to run more ads in the local newspapers that week - this is part of our marketing strategy. Everybody knows that local ads boost sales; therefore your coefficient on Price is biased because you omitted advertising expenditures from the regression." You re-run the regression and include an additional explanatory variable called Ads measuring weekly local ad expenditures. The estimated coefficient on Price in this new regression becomes -0.22. Are these findings consistent with the story of the product manager? Why or why not?

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The findings of the new regression where the estimated coefficient on Price becomes 022 after includ... View the full answer