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Nonlinear models Hill et al Chapter 10. Types of nonlinear models Linear in the parameters. –Includes models that can be made linear by transformation:

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Presentation on theme: "Nonlinear models Hill et al Chapter 10. Types of nonlinear models Linear in the parameters. –Includes models that can be made linear by transformation:"— Presentation transcript:

1 Nonlinear models Hill et al Chapter 10

2 Types of nonlinear models Linear in the parameters. –Includes models that can be made linear by transformation: Nonlinear in the parameters –Require nonlinear least squares.

3 Polynomial terms in a regression For U-shaped curve we expect 2 0 U-shaped marginal cost curve 2 >0, 3 0

4 Interactions between continuous variables Is it reasonable that these effects are independent of income and age?

5 An alternative model

6 Empirical example

7 Nonlinear least squares Minimise sum of squared errors b = se(b) = Simple expressions for the value of beta that minimises S cannot be found. Similarly expressions for the se(beta) cannot be found. The problem is solved numerically.

8 A logistic growth curve

9 Example: proportion of steel produced with electric arc furnace

10 The poisson regression Number of visits to a lake: count data Does not have a normal distribution Poisson distribution is an alternative: is the average or mean number of visits per year, for all households Number of visits Frequency

11 Estimating the conditional mean function in the Poisson regression define the zero-mean error term

12 Computing probabilities in the Poisson regression What is the probability that a household located 50 miles from the Lake, with income of $60,000, and 3 family members, visits the park less than 3 times per year?


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