The manager of an ice-cream parlor decides to introduce a new ice-cream flavor in his Dallas,TX based restaurants to compare the sales of these restaurants to the ones with no new flavors.She decides to run a difference in difference approach.Which of the following is true?
A)The first difference would be the difference in the sales of the Dallas stores before and after the introduction
B)The second difference would be the difference in the sales in other stores before and after the Dallas stores introduced the new flavor
C)The second difference would be the difference between the post introduction sales in the Dallas stores and the control group
D)Only A&B

Question

The manager of an ice-cream parlor decides to introduce a new ice-cream flavor in his Dallas,TX based restaurants to compare the sales of these restaurants to the ones with no new flavors.She decides to run a difference in difference approach.Which of the following is true?
A)​The first difference would be the difference in the sales of the Dallas stores before and after the introduction
B)The second difference would be the difference in the sales in other stores before and after the Dallas stores introduced the new flavor
C)The second difference would be the difference between the post introduction sales in the Dallas stores and the control group
D)​Only A&B

Quizplus · Accepted Answer

In a difference in difference approach, we compare the changes in sales in the treatment group (stores in Dallas with the new flavor) and the control group (other stores with no new flavor) before and after the introduction of the new flavor. Therefore, the first difference would be the difference in the sales of the Dallas stores before and after the introduction (A), and the second difference would be the difference in the sales in other stores before and after the Dallas stores introduced the new flavor (B). Thus, the correct answer is D (A&B). Option C is incorrect because it refers to the post-introduction sales in the Dallas stores only, without considering the sales in the control group.

The Manager of an Ice-Cream Parlor Decides to Introduce a New