The econometric approach

Econometrics confronts economic theory with the reality of behavior observed on markets, by constructing empirical relationships between variables associated with decisions (or events) and variables associated with the motivations or determinants of these decisions. The complexity of empirical relationships depends on the nature of the phenomena under consideration. In the following, we will consider only one decision. If this decision can be expressed by a quantitative variable whose value varies, a priori, continuously, then whatever the form of the variables expressing motivation, the empirical relationship will generally be presented in terms of a classical linear model (also known as a linear regression model), which is the basic tool in econometrics. If, on the other hand, this decision, referring to a qualitative phenomenon, can only be expressed by means of a qualitative variable...