Can anyone help with this problem?
Would appreciate any partial or full input. Thanks.
Suppose that we estimate a model:
but the true model is
What will the consequences be for our regression estimates? Are these serious; is this something we have to care about? Assume instead that it is the way around; thus, that the true model is.
but we are estimating
what are the consequences on our regression estimates. Are these serious consequences; do we need to care about this? Note: No calculations are needed!