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I am using one-hot encoding to transform my categorical variable. But it's not just a presence-absence situation. Consider the variable as a device that can have with different brands as well as different model numbers. So, for example it can be Sony 10, Sony 10.5, or LG 2000, LG 3200. The brands differ and the model numbers have their own range too.

What I did was something like this:

I convert:

---------------------------
|   Index   | Device      
---------------------------
|   0       | Sony,10 
|   1       | Sony,10.5
|   2       | LG,2000
|   3       | LG,3200    

to:

---------------------------
|   Index   | Dev_Sony | Dev_LG      
---------------------------
|   0       | 10       | 0
|   1       | 10.5     | 0
|   2       | 0        | 2000
|   3       | 0        | 3200 

Question: I am using multiple linear regression. Using the above encoding, the model numbers (e.g. 10 vs 10.5) are useful when comparing devices of the same brand, but I'm not sure if they make sense in comparison with other brands. So, I was wondering if there is a better way of encoding such data.

UPDATE

based on the answer, my dataframe would look like this:

|   Index   | Dev_Sony | Dev_LG  | Model_Number   
---------------------------
|   0       | 1        | 0       | 10
|   1       | 1        | 0       | 10.5
|   2       | 0        | 1       | 2000
|   3       | 0        | 1       | 3200
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1 Answer 1

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Make two categorical variables, Device with values Sony, LG, ... and Model_Number with values 10, 10.5, 2000, 3200, ... . Then Model_Number is nested within Device. See then How do you deal with "nested" variables in a regression model? for how to model this.

But, very shortly, if you are using R then use the nesting operator / in the formula language, y ~ Device/Model_Number + ....

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  • $\begingroup$ Thanks for the answer. I'm using Python, if I understand your other post correctly, it should be modelled as "conditional variables": y ~ Device + Device:Model_Number? and why Device/Model_num rather than Device*Model_num? Can you give me a textbook reference where I can read more about this? $\endgroup$ Jan 27, 2020 at 17:22
  • $\begingroup$ Those two notations are equivalent! $\endgroup$ Jan 27, 2020 at 18:04
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    $\begingroup$ No, I mean Dev/Num (which can be read Dev, and within Dev, Num) expands into Dev + Dev:Num. A good discussion is in springer.com/gp/book/9780387954578 $\endgroup$ Jan 27, 2020 at 18:45
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    $\begingroup$ I was implementing this today and realised that I forgot about one part. In practice, I'd still need to get the dummy variables for the devices. So, I'd still end-up with columns of unique devices. R should be doing the same behind the scene (I get the dummy_codes in Python using the Pandas library). Please have a look at the Update based on your answer. And then, I'll have Dev and Dev*Num in the formula. $\endgroup$ Feb 12, 2020 at 5:13
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    $\begingroup$ The data frame in your update looks fine. $\endgroup$ Feb 12, 2020 at 14:15

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