Question

6.4 Predicting Prices of Used Cars. The file ToyotaCorolla.csv contains data on used cars (Toyota Corolla) on sale during late summer of 2004 in the Netherlands. It has 1436 records containing details on 38 attributes, including Price, Age, Kilometers, HP, and other specifications. The goal is to predict the price of a used Toyota Corolla based on its specifications. (The example in Section 6.3 is a subset of this dataset.) Split the data into training (50%), validation (30%), and test (20%) datasets. Run a multiple linear regression with the outcome variable Price and predictor variables Age_08_04, KM, Fuel_Type, HP, Automatic, Doors, Quarterly_ Tax, Mfr_Guarantee, Guarantee_Period, Airco, Automatic_airco, CD_Player, Powered_Windows, Sport_Model, and Tow_Bar. a. What appear to be the three or four most important car specifications for predicting the car’s price?

Answer 1

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Compare the predictions in terms of the predictors that were used, the magnitude of the difference between the two predictions, and the advantages and disadvantages of the two methods.

Our predictions for the two models were very simmilar. A difference of $32.78 (less than 1% of the total price of the car) is statistically insignificant in this case. Our binned model returned a whole number while the full model returned a more “accurate” price, but ultimately it is a wash. Both models had comparable accuracy, but the full regression seemed to be better trained. If we wanted to use the binned model I would suggest creating smaller bin ranges to prevent underfitting the model. However, when considering the the overall accuracy range and the car sale market both models would be

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