To study the effectiveness of a price discount coupon on a six-pack of a soft drink, Douglas Montgomery and Elizabeth Peck collected the data shown in the following table. A sample of 5,500 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.

Transcribed Image Text:

Sample Size Ni Number of Coupons Redeemed Price Discount х, « ni 5 500 100 500 122 500 147 500 176 11 13 500 211 15 500 244 17 500 277 19 500 310 21 500 343 23 500 372 25 500 391