# Consider the regression model ln(demand)= 1 + 2 ln(ownprice)+ 3 ln(competitorsprice)+u How would you interpret the coefficient 2 ?

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.