In a regression model with two dummy variables and an interaction variable d₁d₂:y = $\beta$₀ + $\beta$₁d₁ + $\beta$₂d₂ + $\beta$₃d₁d₂ + $\varepsilon$, the interaction variables are easy to estimate.

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Quizplus · Accepted Answer

The interaction variable is a product of two dummy variables, which is also a dummy variable. Dummy variables are easy to estimate because they take on only two values, 0 and 1.

In a Regression Model with Two Dummy Variables and an Interaction