I have the following two models. I want to know whether these two models can be considered nested or not:
Model 1: y= b0+b1x1+b2x2+b3x3+u
Model 2: y= b1x1+b2x2+b3x3+b4x4+u
Are these two models nested or non-nested? Anybody can help, please? I mean even if I put x4=0, we still have b0 (this is a constant no but it is still considered to be a parameter as far as I know) which is not in model 2. So in my opinion, model 2 can't incorporate model 1. So they are not nested. But I might be wrong. Anybody can please explain?
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