Fits of nonlinear difference equations to time series with observation
errors were examined by stochastic simulation and analysis of plankto
n time series from two lakes. Even modest observation errors (e.g., co
efficient of variation among replicate samples approximate to 10%) cau
se errors in model identification and bias in parameter estimates. The
latter problem can be corrected by estimation techniques that account
for observation error, but model identification is difficult unless t
he state variables are manipulated. Without manipulation, statistical
criteria tend to favor linear models, even when data are simulated by
nonlinear processes. Methods that account for observation error produc
ed satisfactory fits to time series of edible algae from two lakes ove
r 7 yr. In Paul Lake, which has not been manipulated, the best fitting
model included linear growth, a linear functional response for grazin
g loss, and an autoregressive moving average model for the errors. In
manipulated Tuesday Lake, the best fitting model included linear growt
h and a nonlinear functional response. Experimental manipulations, or
other substantial perturbations, may be essential for detection of non
linearities in ecological interactions.