Econ 335 Project

Name:
Section:

1 Problem Description, Data and Method

Problem:

Being the owner of a small movie theater, I am facing a problem that I have only one screen and facing a
decision problem as I have a choice of two movies i.e. Hashtag: Annihilation and Tea and Biscuits in the
Garden to put in my theater. I want to take a decision that which movie to show in my theater.

Data:

I have the data for Ticket Sales, Movies Budget, and Movie Length, regarding past 50 movies shown in my
theater. Furthermore, I have the budget and length data of both the movies as:

 Hashtag: Annihilation: has a budget of 127 million dollars and is 135 minutes long.
 Tea and Biscuits in the Garden: has a budget of 52 million dollars and is 175 minutes long.

Method:

Based on this data, I want to estimate a forecasting model which can help me decide based on movie
budget and movie length that how these can influence my ticket sale. To do so I decided to run a
regression analysis by using Ordinary Least Square method, that seeks to explain daily ticket sales (in
dollars) using the movie’s budget (in millions) and length (in minutes).

2 Descriptive Statistics

The structure of data used in the regression analysis is presented in the below table:

Variable Mean Std. Dev. Minimum Maximum

Ticket Sales 368.65 120.57 63.65 612.57

Budget 111.04 25.50 50 150

Length 118.98 36.93 55 180

Scatter Plots:

Length-Ticket Sales

Budget-Ticket Sales Scatter Plot

700

600

500
Ticket Sales $

400

300

200

100

0
0 10 20 30 40 50 60
Movie Budget (Million $)

Length-Ticket Sales

Movie Length-Sales Scatter Plot

700

600

500
Ticket Sales $

400

300

200

100

0
0 50 100 150 200
Movie Length (Minutes)
3 Regression Model

In this model Ticket Sales is a dependent variable whereas Movie Budget given in Millions of

Dollars, and Movie length given in minutes are the two (observables) independent variables. 𝜺

in the model is the error term that represents all the unobservable factors that may influence

the Ticket Sales.

The model equation as per above explanation of the variables is:

𝑻𝒊𝒄𝒌𝒆𝒕 𝑺𝒂𝒍𝒆𝒔 = 𝜶 + 𝜷𝟏 𝑴𝒐𝒗𝒊𝒆 𝑩𝒖𝒅𝒈𝒆𝒕 + 𝜷𝟐 𝑴𝒐𝒗𝒊𝒆 𝑳𝒆𝒏𝒈𝒕𝒉 + 𝜺

4. Description of Results

(a) Description of F-Stats

While conducting a regression analysis, the F value represent a test with the following null

hypothesis: All the regression coefficients in the given model are jointly equal to zero.

This hypothesis explains the model in hand has no predictive ability and hence the model is

insignificant. In fact, f-test compares complete model having all the variables with a model with only

intercept and no predictor. F-test explain the significance of inclusion of all variables in the model

by depicting the rise in predictability power of the model with predictors in comparison to model

without predictors. A significant F-stat describe based on the probability of the model describe that

variables significantly contributes to the model fit. A significant F-state requires a critical value

greater than or equal 4.

In this case as shown in the below given table:

ANOVA Table
df SS MS F Significance F
2 175155.97 87577.98 7.66 0.0013
 The F-State=7.66 with probability 0.0013. This shows that model is significant in predicting the

ticket sales based on movie budget and movie length. And we can reject the null hypothesis that

“Regression coefficient of movie budget and movie length in the model are jointly equal to

zero”

Regression Results:

Overall Model Statistics

n 𝑅2 Adjusted 𝑅 2 Standard Error
50 0.246 0.214 106.904

𝑅 2 in a model describe the explanatory power of the model based on variables included in the model. A

lower 𝑅 2 means a lower explanatory power and hence depicts the need of inclusion of some other factors

in the model for full explanatory power. In this case the value of 𝑅 2 = 0.246 explains that Ticket Sales as

per the data given are only explained 24.6 % by the movie budget and movie length. This depicts that

there are some other variables which may be considered in the analysis and which may increase the

explanatory power of the model.

Coefficients:

Regarding two predictors we have following hypothesis:

1: For Movie Budget

Ho: The effect of Movie Budget on Ticket Sales is equal to zero (Insignificant)
Ha: The effect of Movie Budget on Ticket Sales is non-zero (Significant)
1: For Movie Length

Ho: The effect of Movie Length on Ticket Sales is equal to zero (Insignificant)
Ha: The effect of Movie Length on Ticket Sales is non-zero (Significant)
The results of regression analysis are summarized in the following table:

Independent Standard 95% Confidence Interval

Coefficients t Stat P-value
Variable Error Lower Bound Upper Bound
Intercept 181.732 88.324 2.058 0.045 4.05 359.42
Budget -0.047 0.602 -0.079 0.938 -1.26 1.16
Length 1.615 0.416 3.887 0.000 0.78 2.45

As depicted in the above table, Movie Budget has a negative impact on the ticket sales as shown

by the coefficient value (-0.047). This explains that with every million rise in movie budget the

ticket sales drop by 0.047 dollar. If we look at the significance of the effect of movie budget, then

it is clear from the t-state (-0.079) and p-value (0.938) as well as zero lies in the 95% confidence

interval. This whole explains the insignificance of Movie Budget towards influencing the Ticket

Sales. Thus, we accept the null hypothesis that “The effect of Movie Budget on Ticket Sales is equal

to zero (Insignificant)”.

On other hand, Movie length has a positive impact on the ticket sales as shown by the coefficient

value (1.62). This explains that with each minute increase in movie length the ticket sales rise by

1.62 dollars. If we look at the significance of the effect of movie length, then it is clear from the

t-state (3.887) and p-value (0.000), as well as zero does not lies in the 95% confidence interval.

This whole explains the significant impact of Movie length on Ticket Sales. This leads us to reject

the null hypothesis that “The effect of Movie Length on Ticket Sales is equal to zero (Insignificant)”.

With the effect of movie budget on ticket sales is insignificant, the estimated equation for the model

described is:

𝑻𝒊𝒄𝒌𝒆𝒕 𝑺𝒂𝒍𝒆𝒔 = 𝟏𝟖𝟏. 𝟕𝟑 − 𝟎. 𝟎𝟒𝟕 𝑩𝒖𝒅𝒈𝒆𝒕 + 𝟏. 𝟔𝟐 𝑳𝒆𝒏𝒈𝒕𝒉

By using this estimated equation, we can forecast the ticket sales for both the movies. The forecasted

sales are described in following table:

Movie Budget Length Ticket Sale= 181.73-0.047 Budget+ 1.62 Length

Hashtag: Annihilation: 127 135 394.461
Tea and Biscuits in the Garden: 52 175 462.786

5. Conclusion:

With insignificant impact of movie budget on ticket sales, the effect of movie length is positive

and significant. This describe that showing a movie with longer time will increase ticket sales with

every one-minute increase in movie length will induce a positive change of 1.62 dollars in ticket

sales. Thus, based on the estimated model it is appropriate to show “Tea and Biscuits in the

Garden”, a movie with less budget but more time of entertainment. Doing so will increase the ticket sales.