Linear probability model, Mathematics

Assignment Help:

Pepsi:               A dummy variable where 1 denotes choice of Pepsi by the i-th customer and 0 otherwise

Price_P:           The price of a 2-liter bottle of Pepsi at the time of purchase

Price_7:           The price of a 2-liter bottle of 7-Up at the time of purchase

Price_C:           The price of a 2-liter bottle of Coke at the time of purchase

Disp_P:            A dummy variable where 1 denotes whether Pepsi was displayed at the time of purchase and 0 otherwise

The purpose of this exercise is to determine the factors that explain the choice of Pepsi over other types of colas.

  a. Using these data, estimate the probability (proportion) of a customer choosing Pepsi for (i) all cases; and (ii) for the cases where Pepsi is displayed.

  b. Assuming that a relationship exists between choosing Pepsi as the dependent variable and the rest as the independent variables, hypothesize the signs of the βk coefficients.

  c. Run 3 regressions of this relationship using a linear probability model, a logit model, and a probit model, and make a summary table including the estimated coefficients with their t/z ratios, R2, and the proportion of correct predictions coming from the 3 models.

  d. Calculate the proportion of correct predictions coming from the 3 models.

  e. Without running a significance test, evaluate the estimated coefficients.

  f.  Create a second table with the transformed coefficients of the logit and probit models to make them comparable to those of the linear probability model E.

 g. Using the 3 models, evaluate the probability of choosing Pepsi when Pepsi is displayed and when Pepsi is not displayed while the prices of all three drinks are equal at $1.50 per 2-liter bottle.


Related Discussions:- Linear probability model

Examples on log rules, Examples on Log rules: Example:      Calculate...

Examples on Log rules: Example:      Calculate (1/3)log 10   2. Solution: log b n√A = log b A 1/n = (1/n)log b A (1/3)log 10 2 = log 10 3 √2 = log 10 1.

A fire in a building b is reported on telephone, A fire in a building B is ...

A fire in a building B is reported on telephone to two fire stations P and Q, 10km apart from each other on a straight road.  P observes that the fire is at an angle of 60 o to th

Practice, #question.Mai is 3 years ypunger than twice the age of her brothe...

#question.Mai is 3 years ypunger than twice the age of her brother .If b represents .

Geometric applications to the cross product, Geometric Applications to the ...

Geometric Applications to the Cross Product There are a so many geometric applications to the cross product also.  Assume we have three vectors a → , b → and c → and we make

Calculate the average return, A department store faces a decision for a sea...

A department store faces a decision for a seasonal product for which demand can be high, medium or low. The purchaser can order 1, 2 or 3 lots of this product before the season beg

Definition of higher order derivatives, Higher Order Derivatives : Le...

Higher Order Derivatives : Let's begin this section with the given function.                            f ( x ) = 5x 3 - 3x 2 + 10 x - 5 By this point we have to be a

What was the total cost of her order, Leslie ordered a slice of pizza for $...

Leslie ordered a slice of pizza for $1.95, a salad for $2.25, and a soda for $1.05. What was the total cost of her order? The cost of every item must be added together; $1.95 +

Shares and dividends, suresh invested rs.1080 in shares of face value rs.50...

suresh invested rs.1080 in shares of face value rs.50 at rs.54.After receiving dividend on them at 8% he sold them at 52.In each of the transaction he paid 2 % brokerage.Hpw much d

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd