Project I

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Project I

• The Challenger Disaster

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What to do with the zeros?
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Never Throw Away Data
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Which is the greater sin, (1) throwing away data
or running a biased regression?
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Two Regression Approaches

• Probability Models Qualitative dependent
• Linear probability model
• Non-linear
• Probit
• logit
• Number Models Quantitative dependent
• OLS, biased
• Tobit extension of probit
• Count models
• Poisson

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Probability Models

• One or more failures per launch coded as 1
• Zero failures per launch coded as 0

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Low Temperature 6 launches with failures out of
12 cases
High Temperature 1 launch with failure out of12
cases
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5
1.645
-34.7
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Ex Post the event either happens (code 1) or
does not (code 2)
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Ex Ante what is the probability the event will
happen?
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Is there another factor besides temperature?
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Who Me Worry?

• The Culture at NASA getting away with problems
  that should be fixed
• O-rings
• Foam
• NASA may not have been so worried about o-ring
  failures. They had experienced successful returns
  of the shuttle with as many as three o-ring
  failures

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Quantitative Models
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1 obs.
2 obs.
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Check List

• Data
• Plots
• 7 launches with failures
• 24 launches
• Linear probability model, logit or probit
• of O-Ring failures per launch, OLS, Tobit,
  Poisson
• Estimation Results, Labeled
• Goodness of fit
• Significance t-stat, F-stat

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