Consider the regression model
ln(demand)=β1+β2ln(ownprice)+β3ln(competitor′sprice)+u
How would you interpret the coefficient β2 ?
A 1% increase in my own price will lead to a -β2 % change in demand, if my competitor does not change his/her price.
A 1% increase in my own price will lead to a -β2 % change in demand, taking into account my competitor’s reaction to my price change.
A 1% increase in my own price will lead to a -β2/100 unit change in demand, taking into account my competitor’s reaction to my price change.
A 1% increase in my own price will lead to a -β2/100 unit change in demand, if my competitor does not change his/her price.
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