Goodwives Example Comments on Excel Workbook

Goodwives Example Comments on Excel Workbook

Version:February 19, 2014

Comments by Prof. Clapp

File (workbook name): Prof Clapp GoodwivesStep3.xls

Tab 3.2(1 and 2): Excellent job. Conclusions are appropriate to Goodwives and comments guide the user through the page. The CPI data given in the Simsbury Commons case are updated correctly, lines 71-74. A new, creative and appropriate analysis – income estimated from house prices – is presented on lines 82-89.

Tab 3.2(3 and 4): the team found that CoStar total expenditure, at over 70% of income within 5 miles, is too optimistic. Excellent. So they adjusted expenditures down to more realistic numbers. Good logic.

Next, the team tries to explain the difference between CoStar % expenditure by category (columns Q,R and S) and BLS Consumer Expenditure Survey (Columns T and U).They missed something important here:

• Expenditures by type change a lot with income. See BLS Expenditure by higher income (found by Prof. Clapp on Bureau of Labor Statistics - BLS - website).
• Incomes within 5 miles of Goodwives are very diverse: much higher in Darien than in Norwalk.
• Food at home (line 50) declines dramatically with income (from around 9% to about 5%) because all people require about the same number of calories to live, regardless of income.
• Even food away from home (line 78) is roughly constant for these high income households. How much can one spend at restaurants?
• Same thing for apparel and transportation, lines 115 and 127. Again this is logical. While one can buy a Gucci bag or a BMW, most people don’t do this, so expenditures on apparel and transportation stays at a fairly constant fraction income as income rises. In fact, at the very high incomes characteristic of Darien, transportation declines as a % of income.

Prof. Clapp’s conclusion on “what to customers care about?” Use BLS Expenditure by higher income for the higher incomes around Goodwives.

Two Tabs 3.2(5) and leakage tab:These tabs do a good job of following the class example (Simsbury Commons), with appropriate adaptation to Goodwives. The conclusion – substantial leakage of expenditures outside Darien – is convincing given the limitations of retail within Darien and the large incomes available for expenditure. However, it is good that the team qualifies their conclusion – “we cannot definitively say this, but … .”

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