where α0 is a constant and uit denotes the error term. The error term captures the respondents inability to communicate actual well-being perfectly correct. It also captures the fact that only discrete responses are allowed. People might, for instance, be uncertain whether to report a 4 (happy) or 5 (very happy), because they feel somewhere in between. Then, the error term reflects that the person must decide to round up or down. A more realistic model contains further explanatory variables, or taste shifters. These regressors and their corresponding coefficient vector are given by Xit and β, respectively. This can be estimated by the following multivariate linear regression: