# Understanding the modelling formula of a poisson regression with 2 categorical predictors

by Jorden   Last Updated November 08, 2018 23:19 PM

I have the following dataset:

> df1
Location SalesQty product
1  location 3        1   prod1
2  location 3        0   prod1
3  location 3        3   prod1
4  location 5        3   prod1
5  location 5        0   prod1
6  location 5        4   prod1
7  location 3        2   prod2
8  location 3        5   prod2
9  location 5        2   prod2
10 location 5        1   prod2


I want to perform a poisson regression to predict/estimate the SalesQty of prod1 on location 3 and 5 and prod 2 on location 3 and 5 (I know there are not enough datapoints such that a predictor will be significant). The SalesQties can be visualised as:

If you run:

Reg <- glm(SalesQty ~ Location, family = "poisson", data = df1)


The predictions on each location is just the average per location. This is due to the least squares error per location.

If you run:

Reg <- glm(SalesQty ~ product + Location, family = "poisson", data = df1)


I am figuring out how the coefficients of each categorized predictor play a role in the formula for predicting the SalesQty of a product on a location.

Only considering the location, the formula will be: ln(SalesQty) = $$\beta_0$$ + $$\beta_5 I_5$$ with $$\beta_0$$ beiing the intercept corresponding to location 3. Now $$exp(\beta_0)$$ is the average of the SalesQties of location 3 and $$exp(\beta_0$$ + $$\beta_5)$$ is the average of the SalesQties of location 5. But when considering 2 categorical predictors, the location ánd the product, I don't see how to interpret the coeficients and the modelling formula.

I hope someone can send me in the right direction

Tags :