If a qualitative variable has m categories, you should use m - 1 dummy variables to incorporate the qualitative variable into a regression model.

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Quizplus · Accepted Answer

This is known as the "dummy variable trap" and can lead to issues with multicollinearity in regression models. By using m-1 dummy variables, the reference category is explicitly defined and can be used as a baseline for comparisons to the other categories.

If a Qualitative Variable Has M Categories, You Should Use