In describing the data-generating process for "click-throughs" for one of your firm's advertising campaigns you've assumed the following relationship: Y_i = f (H_i, J_i) + U_i, where Y_iis if individual i clicked through, H_i is individual i's household income, J_i is an indicator for whether or not individual i has a job. What type of factors might be contained in U_i? A) A factor that affects J_i but does not affect Y_i. B) A factor that affects H_i but does not affect Y_i. C) A factor that affects H_i and Y_i. D) None of the answers is correct.

Question

Quizplus · Accepted Answer

The variables H_i and J_i are already accounted for in the model as predictors of Y_i. Therefore, any additional factors contained in U_i must affect Y_i but not be accounted for by H_i or J_i. Therefore, option C is the correct answer as U_i could contain variables that affect both household income and click-throughs.

In Describing the Data-Generating Process for "Click-Throughs" for One of Your