Problem 2: Consider a data set consisting of observations on i = 1,... ,n units over t = 1,...,T time periods and suppose that n is large and T is small (e.g., you have n = 5000 patients observed over T = 10 years). Write down an econometric model that can be used to analyze the data and explain its components. What problems arise if in your regression you ignore the fact that patients are potentially heterogeneous? Show an example of this graphically. Discuss one approach to estimating the parameters of this model, listing the necessary steps.

Problem 2: Consider a data set consisting of observations on i = 1,... ,n units over t = 1,...,T time periods and suppose that n is large and T is small (e.g., you have n = 5000 patients observed over T = 10 years). Write down an econometric model that can be used to analyze the data and explain its components. What problems arise if in your regression you ignore the fact that patients are potentially heterogeneous? Show an example of this graphically. Discuss one approach to estimating the parameters of this model, listing the necessary steps.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter4: Estimating Demand

Section: Chapter Questions

Problem 8E

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