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Last Updated on July 24, 2023 by Editorial Team

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Originally published on Towards AI.

In this article, I will explain why when building a linear model, we add an x₁x₂ term if we think the variables x₁ and x₂ interact and conclude with a principled method to add interaction terms.

The content of this article is based on Chapter 8 of [1].

I assume the reader has a basic understanding of how linear models work.

Let’s begin by building a model with no interaction terms.

Suppose we would like to model y as a function of x₁ and x₂. Then, a linear model that describes this relationship is:

Figure 1: A linear model with no interaction terms

We call α… Read the full blog for free on Medium.

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