if the overall average was .11 and the city had .2 but only 200 observations but I require 400 observations to fully trust it, I’d set Z as sqrt(200/400) and make the weighted average as Z * .2 + (1 - Z) * .11, then cluster based on the weighted average. I wasn’t very scientific with selecting the requirements to fully trust the number but I did try varying it and checking what values resulted in clusters that improved CV fit.
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