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Marginal Changes in Random Parameters Ordered Response Models with Interaction Terms


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  • Andreas Drichoutis
  • Rodolfo Nayga


Marginal changes of interacted variables and interaction terms in random parameters ordered response models are calculated incorrectly in econometric softwares. We derive the correct formulas for calculating these marginal changes. In our empirical example, we observe significant changes not only in the magnitude of the marginal effects but also in their standard errors, suggesting that the incorrect estimation of the marginal effects of these variables as is commonly practiced can render biased inferences on the findings.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Econometric Reviews.

Volume (Year): 30 (2011)
Issue (Month): 5 ()
Pages: 565-576

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Handle: RePEc:taf:emetrv:v:30:y:2011:i:5:p:565-576

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Keywords: Discrete changes; Interaction term; Marginal effects; Ordered models;


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Cited by:
  1. Drichoutis, Andreas, 2011. "Interpreting interaction terms in linear and non-linear models: A cautionary tale," MPRA Paper 33251, University Library of Munich, Germany.
  2. Teresa, Briz & Drichoutis, Andreas & Nayga, Rodolfo & House, Lisa, 2011. "Examining Projection Bias in Experimental Auctions: The Role of Hunger and Immediate Gratification," MPRA Paper 44764, University Library of Munich, Germany, revised 05 Mar 0013.
  3. Corrigan, Jay & Drichoutis, Andreas & Lusk, Jayson & Nayga, Rodolfo & Rousu, Matt, 2011. "Repeated Rounds with Price Feedback in Experimental Auction Valuation: An Adversarial Collaboration," MPRA Paper 28337, University Library of Munich, Germany.


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