Question: Consider a binary response variable y and an explanatory variable x. The following table contains the parameter estimates of the linear probability model (LPM) and

Consider a binary response variable y and an explanatory variable x. The following table contains the parameter estimates of the linear probability model (LPM) and the logit model, with the associated p-values shown in parentheses.

Variable................ LPM............. Logit

Constant............... −0.40.............−4.50

...........................(0.03)............ (0.01)

x.......................... 0.32...............1.54

..........................(0.04).............. (0.03)

a. Use both models to predict the probability of success as x varies from 1 to 5 with increments of 1.

b. Comment on the suitability of the linear probability model in modeling binary outcomes.

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