Module 3.3: Discrete Choice Models

Question 1

What is the formula for probability?

Answer 1

Pr(i) = e^(Ui) / ∑e^(U)

Question 2

What is MLE?

Answer 2

Maximum likelihood estimation

- used to estimate coefficients of a utility function

Question 3

What is a utility function?

Answer 3

U = B1.x1 + B2.x2 + … + Bn.xn

Question 4

How do you calculate the probability of event A, B, and C occurring at once?

Answer 4

P(A,B&C) = P(A) x P(B) x P(C)

Question 5

What is rho^2?

Answer 5

Measures goodness of fit
p^2 = 1 - LL(B*) / LL(0)
Where LL = log likelihood (ln)
LL(0) = equal likelihoods