Model Perspective

Jul 31, 2022 · Fundamentals

Why OLS Fails for Discrete Choices: Understanding Probit and Logit Models

Discrete choice models, including binary and count data, require specialized estimation techniques such as Probit and Logit rather than OLS, and this article explains their foundations, link functions, marginal effects, goodness‑of‑fit measures, heteroskedasticity issues, and practical interpretation for policy analysis.