Question

Define an interaction effect and provide at least one example. What is one way to deal with it in a regression model?

Answer 1

Interaction effect

Interaction effect is the simultaneous effect of two or more independent variable on the dependent variable.

Example of interaction effect

Suppose we want to test how the product strength changes with temperature, pressure and time.

To do this we fit a regression model, but in this case as we know that pressure and temperature are related with each other, though they are independent indivitually but they both combinedly affect the product strength as well.

Hence the interaction term here would be temperature and pressure combined.

one way to deal with it in regression model is to fit a model which contain a regressor which is basically the multiplication of those two interaction variables.

Thank you !!