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Statistics Project
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Rent-A-Car: Demand For “Economy” Vehicles

Statistics Project Instructions:

Datasets and description for the case assignments:

  1. Estimate the demand for “economy” vehicles using variables provided, you might also derive data from other resources and combine with the dataset. Choose the best model.
  2. Forecast the demand for the “economy” vehicles in Week 30.
  3. Our customers who choose to keep a car for an extra day are currently paying the same base daily rate. Do you see any potential in exploring alternative schemes? If so, what changes should we implement-shall we change the price for extra days? What considerations are involved in this decision? Provide your thoughts on this issue.
  4. What other issues or news you would pay attention to adjust your price and managerial strategies?

Demand estimation model selection guidelines

  1. Find a model with adjusted R-squared above 0.7
  2. Coefficient for PownE should be negative and significant (|t|>2)
  3. At least half of the coefficients should bear the correct signs (you should be able to explain the signs) and be statistically significant (|t|>2)
Statistics Project Sample Content Preview:
      Project Rent a Car Name Institution Date         Part 1
  1. 1.      Estimate the demand for “economy” vehicles using variables provided, you might also derive data from other resources and combine with the dataset. Choose the best model.
  Coefficients
Intercept 66.57193606
PownE -0.127770438
Pcomp 0.019747865
TotlAD -0.000271007
unempl 0.000227238
flights/wk 0.168145206
wrecks 0.141128711
Q_length 0.233578764
E_days -18.01469278
age/weeks 0.07495796
  Using the bed tax independent variable in excel results in incorrect values indicated as “LINEST function returns error. Please check input ranges again” and was excluded from the analysis. QE is a proxy for the quantity demanded and is assumed to be the dependent variable in the model (Chulkov & Nizovtsev, 2012). UI estimated the demand using QE as the dependent variable and in the 52nd week this was 81.86609, which is approximately 82.
  1. 2.      Forecast the demand for the “economy” vehicles in Week 30.
When considering the number of rental contracts initiated each week in the economy category (QE) as the dependent variable and the number of weeks as the independent variable then and the demand in the 30th week is 90.21, which is  approximately 91 using the regression line.      
  1. Our customers who choose to keep a car for an extra day are currently paying the same base daily rate. Do you see any potential in exploring alternative schemes? If so, what changes should we implement-shall we change the price for extra days? What considerations are involved in this decision? Provide your thoughts on this issue.
Even as the base daily rate remains the same when customers use extra date the pricing structure needs to break down the base rate for different hours and charge extra day rate when the customers can afford. For instance, the base amount can be for 0- 6 hours, another for 6-12 hours and the third option 12-24 hours. Price competitiveness influence the demand for the services, and passengers using the economy option are more price sensitive to those using the luxury option. As such, the higher price increase is more likely to affect the economy class negatively, and if the competitors offer more attractive prices, the passengers in the economy class are likely to choose the services of such firms. Ideally, decisions on pricing strategies ought to utilize market research to choose attractive and reasonable prices. Besides the list price, the different aspects of price selection selections are the allowances, discounts, credit terms and the payment period. Pricing influences a firm’s competitiveness and can be changed easily compared to other variables like marketing.  There ought to be consideration of discounts focusing on the pre-order discounts that are provided when the clients/ passengers use the rental services within a specified time frame.  When offering discounts targeting the loyal customers can improve the company’s brand where unlimited free miles can be offered for the most loyal ones.  
  1. 4.      What other issues or news you would pay attention to adjust your price and managerial strategies?
There are high and low seasons and partly depending on the number of airline passengers arriving or departing since many use car rentals and taxis. Similarly, the passengers on business and leisure trips affect the demand for car rental services. When there is increasing traveling during the high seasons, it is more likely that there will be higher demand for rental cars including during summer time (Habibi, Kim & Laroche, 2016).  The differences in the use of car rental services are also apparent in different locations, highlighting the need to consider location when choosing pricing, the car inventories and strategizing to improve competitiveness.   When there are changes in taxes and other charges that affect the car rental industry, this is taken into consideration. For instance, insurance coverage city surcharge and different types of charges may be included in the bill, depending on police adopted at the state level. This affects pricing increasing the final price, yet this may not be apparent at first when   prices are first quoted. As such, there will be no unexplained charges targeting the passengers and a breakdown of the prices will be provided when there is enquiry and changes adopted. While the demand for the car rental services is quantifiable, the management needs to use tactics and strategies that support the company’s efforts.  Companies face everyday challenges to improve operations in an efficient way while seeking to remain competitive (Habibi, Kim & Laroche, 2016). In any case, problem solving and utilizing strategies to achieve long-term goals supports deep learning. Additionally, there are insights on whether to change strategies when there is access to information since it is possible to evaluate trends and changes in revenue patterns associated with the choice of different strategies.  There is a choice between maximizing revenue and reducing expenses for car rental and since there is increased competition, improving the quality of services will improve the company’s ability to meet customer needs (Ola, 2017). Similarly, focusing on the diversified car rental operations will improve competitiveness; there will also be review on whether to cut hours at certain times or save expenses. As such considering the different pricing options, which affect revenue and expenses allows the managers to reflect on the strategic decisions likely to improve outcomes.  The case study provides insights on how different factors affect the demand for economy vehicles beyond the price Part 2 Problem Set #2 (Project) Demand estimation model selection Model QE= 66.57193606 -0.127770438PownE+  0.019747865Pcomp -0.000271007TotlAD+ 0.000227238unemp+ l 0.168145206+ flights/wk 0.141128711+ wrecks 0.233578764+ Q_length -18.01469278 E_days +0.07495796 age/weeks
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SUMMARY OUTPUT          
             
Regression Statistics          
Multiple R 0.99274846          
R Square 0.985549505          
Adjusted R Square 0.982452971          
Standard Error 1.387331294          
Observations 52          
     
ANOVA            
  df SS MS F Significance F