Path Modeling
In the model below, the two exogenous variables (Ex1 and Ex2) are modeled as being correlated and as having both direct and indirect (through En1) effects on En2 (the two dependent or 'endogenous' variables). In most real models, the endogenous variables are also affected by factors outside the model (including measurement error). The effects of such extraneous variables are depicted by the "e" or error terms in the model.
Using the same variables, alternative models are conceivable. For example, it may be hypothesized that Ex1 has only an indirect effect on En2, deleting the arrow from Ex1 to En2; and the likelihood or 'fit' of these two models can be compared statistically.
Read more about this topic: Path Analysis (statistics)
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