Statistical analysis of Besen's equation to estimate the value of television time (described in R-1328). It has two hidden problems: (1) The magnitudes of the coefficients imply that adding a station to a market sometimes increases time RATEs of stations already in the market. (2) The equation does not explain time RATEs for independent UHF stations. Two ways to correct this were tried: (1) A simultaneous equations approach (TSLS) produces an estimated equation that straightens out the anomalous implications. However, it fails to explain time RATEs for independent UHF stations. (2) Estimating separate TSLS equations for each station class also fails to have any explanatory power for independent UHF stations, but separate OLS equations appear to solve both of the problems. However, they may have hidden problems of their own. This exercise yields two important lessons: (1) High [R]-squared and [t]-statistics do not guarantee a problem-free equation. (2) Coefficients probably differ between natural subsamples, and the hypothesis that they are the same should always be tested.
This report is part of the RAND Corporation Paper series. The paper was a product of the RAND Corporation from 1948 to 2003 that captured speeches, memorials, and derivative research, usually prepared on authors' own time and meant to be the scholarly or scientific contribution of individual authors to their professional fields. Papers were less formal than reports and did not require rigorous peer review.
This document and trademark(s) contained herein are protected by law. This representation of RAND intellectual property is provided for noncommercial use only. Unauthorized posting of this publication online is prohibited; linking directly to this product page is encouraged. Permission is required from RAND to reproduce, or reuse in another form, any of its research documents for commercial purposes. For information on reprint and reuse permissions, please visit www.rand.org/pubs/permissions.
The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.