5.4 Example: Linear model (Visualization)

• Trust_i = b₀ + b₁Victim_i + b₁Education_i + \(\epsilon\)_i (Wikipedia)
• Straight line of equation above is not model of the data
  • Admissible model must be consistent with all the data points
  • Line cannot be model, unless it exactly fits all the data points
  • The error term, \(\epsilon\)_i, must be included in the model, so that it is consistent with all data points
• Statistical inference:
  • Assume some probability distributions for the \(\epsilon\)_i, e.g. i.i.d. Normal, with zero mean
  • Model has 3 parameters: b₀, b₁, b₂