Source: Donald F. Morrison, Applied Linear Statistical Methods, Prentice-Hall, Inc. Englewood Cliffs, N.J., 1983, p. 279 (adapted).

Source: Donald F. Morrison, Applied Linear Statistical Methods, Prentice-Hall, Inc. Englewood Cliffs, N.J., 1983, p. 279 (adapted).

a. Use the LPM model to predict the probability of admission to the program based on quantitative and verbal scores in the GRE.

b. Is this a satisfactory model? If not, what alternative(s) do you suggest?

15.16. To study the effectiveness of a price discount coupon on a six-pack of a two-liter soft drink, Douglas Montgomery and Elizabeth Peck collected the data shown in Table 15.22. A sample of 5500 consumers was randomly assigned to the eleven discount categories shown in the table, 500 per category. The response variable is whether or not consumers redeemed the coupon within one month.

a. See if the logit model fits the data, treating the redemption rate as the dependent variable and price discount as the explanatory variable.

b. See if the probit model does as well as the logit model.

c. What is the predicted redemption rate if the price discount was 17 cents?

d. Estimate the price discount for which 70 percent of the coupons will be redeemed.

CHAPTER FIFTEEN: QUALITATIVE RESPONSE REGRESSION MODELS 631

Price discount X, 0 |
Sample size N |
Number of coupons redeemed n |

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