Problem Set 8, MGTECON 603, 2009
1
MGTECON 603, Econometrics I
Jules H. van Binsbergen
Fall 2009
Stanford GSB
PROBLEM SET 8
Due: Monday December 7
th
This problem set is to be done on the computer. I would prefer you use MATLAB but you
can use any statistical package that you want, as long as you program in the steps required
yourself (i.e., don’t use a canned routine written by someone else
except
to maximize the
likelihood function).
Before starting this problem set you will need to download the data file from the course
web site.
The data file is entry data for Southwest airlines.
The data consist of a cross
section of markets to which Southwest is a potential entrant (that is, they already fly to one
endpoint in the city pair). The variables are noted in the data file and include whether or
not Southwest entered that market, as well as several market variables. (Note that this is
real data, but you might get strange results anyway.)
Consider the following model.
If Southwest enters a given market
i
, it receives profits
given by
π
i
=
β
′
x
i
+
ǫ
i
where
ǫ
i
is
N
(0
,
1) and independent across markets
i
, and
β
is an unknown parameter vector.
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
This is the end of the preview.
Sign up
to
access the rest of the document.
 '09
 BIRSBERGEN
 Statistics, Normal Distribution, maximum likelihood estimate, parameter vector

Click to edit the document details