Questions and Answers of Experimental Economics

3. Consider the various choice models that have been introduced in this chapter.
(c) Usually, the logit and probit models give results that are similar but not the same. In the present situation, you will see that they give results that are exactly the same. Why is this?
(b) All of the results in the table can also be obtained by using a logit model with no explanatory variables. Try this.
(a) Obtain the second column of results in the above table using the probit model.
a probit model with no explanatory variables, and then applying the delta method. There, we obtained the first column of the above table for the purpose of demonstration.
In Section 6.5.3, we explained how these results could also be obtained by estimating
2. In Section 6.2.1, we considered an example in which the objective was to estimate the proportion of red balls in an urn containing red and white balls. We considered a situation in which ten balls
(g) Using the delta method, find a standard error, and confidence interval, for the “risk-neutral initial endowment” computed in (f). Do this for both probit and logit. Which model estimates this
(f) In Section 6.2.2, the initial endowment necessary to induce risk-neutrality(i.e. a probability of 0.5 for the safe choice being chosen), under the probit model, was estimated to be $9.23. Find an
(e) Do logit and probit lead to similar conclusions?
(d) Write a program in STATA that computes the logit log-likelihood, and maximise it using ML. It should give the same answer as (a).
(c) Use Excel to predict the probability of choosing S over the range of wealth levels.
(b) Test for the presence of a wealth effect.
(a) Estimate the logit model using the command:logit y w.
Consider again the house_money_sim data.

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