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Marginal Changes in Random Parameters Ordered Response Models with Interaction Terms

Author

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  • Andreas C. Drichoutis
  • Rodolfo M. Nayga

Abstract

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.

Suggested Citation

  • Andreas C. Drichoutis & Rodolfo M. Nayga, 2011. "Marginal Changes in Random Parameters Ordered Response Models with Interaction Terms," Econometric Reviews, Taylor & Francis Journals, vol. 30(5), pages 565-576, October.
  • Handle: RePEc:taf:emetrv:v:30:y:2011:i:5:p:565-576
    DOI: 10.1080/07474938.2011.553564
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    File URL: http://hdl.handle.net/10.1080/07474938.2011.553564
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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 & Andreas Drichoutis & Lisa House, 2015. "Examining projection bias in experimental auctions: the role of hunger and immediate gratification," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 3(1), pages 1-17, December.
    3. Jay R. Corrigan & Andreas C. Drichoutis & Jayson L. Lusk & Rodolfo M. Nayga & Matthew C. Rousu, 2012. "Repeated Rounds with Price Feedback in Experimental Auction Valuation: An Adversarial Collaboration," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(1), pages 97-115.

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