Relative importance of function inputs

derivativesfunctions

Let's assume I have the following function:

$r = \frac{ln(e)}{\sqrt{c}} \cdot \left(1+\frac{s}{100}\right)$, with $r$ growth rate, $e$ expenditure, $c$ competition, and $s$ satisfaction.

I observe the relevant data over time, e.g.,

r e s c
1.13 100 90 60
0.91 90 80 80
1.08 105 95 70

Is there a sound approach to obtain the relative importance of the different input factors (i.e., $e$, $s$, and $c$)? I was thinking of taking the changes of all variables relative to the previous observations times their respective partial derivatives. Formally expressed as: $\frac{\partial r}{\partial e}\cdot \bigtriangleup e$ etc. However, this does not necessarily align because only the first-order derivative is considered.

Best Answer

I might not be exact here, but would you call the relative importance "sensitivity"?

My thought comes from stability analysis, we could think the other way in your case, i.e., how unstable is $r$ with respect to a change in a variable $x$. To do that, I will take $r$ and nudge its input by $\Delta x$ to see how far the new $\tilde{r}:=r+\Delta r$ is:

  • For $s$ (the easiest): $$r(s+\Delta s) =\frac{\ln(e)}{\sqrt{c}}\left(1+\frac{s+\Delta s}{100}\right) =\frac{\ln(e)}{\sqrt{c}}\left(1+\frac{s}{100}\right) +\frac{\ln(e)}{\sqrt{c}}\frac{\Delta s}{100} = r(s) + \Delta_s r.$$
  • For $e$, I will use the expansion of $\ln$: $$r(e+\Delta e) =\frac{\ln(e+\Delta e)}{\sqrt{c}}\left(1+\frac{s}{100}\right) =\frac{1}{\sqrt{c}}\left(1+\frac{s}{100}\right)\left(-\sum^\infty_{n=1}\frac{(-1)^n(-1+e)^n}{n}+\mathcal{O}(\Delta e^n)\right) =r(e)+\Delta_e r$$ with $\Delta_e r$ left for the reader to compute (sorry!). The expansion is important because it allows us to separate the terms $(-1+e+\Delta e)^n$.
  • Lastly, for $c$, similarly as above: $$r(c+\Delta c) =\frac{\ln(e)}{\sqrt{c+\Delta c}}\left(1+\frac{s}{100}\right) =\ln(e)\left(1+\frac{s}{100}\right) \left(-\sum^\infty_{n=0}\binom{-\frac12}{n}(-1+c)^n+\mathcal{O}(\Delta c^n)\right) =r(c)+\Delta_c r$$

Comparing $\Delta_s r$, $\Delta_e r$ and $\Delta_c r$, would tell you that the fastest growing one is the most sensitive, i.e., the largest in displacement is the most important to $r$.

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