Consider the choice between two options, such as two product brands. Let U 0 denote the utility
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Consider the choice between two options, such as two product brands. Let U0 denote the utility of outcome y = 0 and U1 the utility of y = 1. For y = 0 and 1, suppose that Uy = αy + βy x + ԑy, using a scale such that ԑy has some standardized distribution. A subject selects y = 1 if U1 > U0 for that subject.
a. If ԑ0 and ԑ1 are independent N(0, 1) random variables, show that P(Y = 1) satisfies the probit model.
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