On the Use of Enumeration for Investigating the Performance of Hypothesis Tests for Economic Models with a Discrete Response Variable

This article notes that it is now practical to use the method of enumeration to analyse the performance of estimators and hypothesis tests of fully parametric binary data models. The general method is presented and then employed to investigate the power performance of a common misspecification test for the Probit model. The advantages, disadvantages and limitations of enumeration compared with standard Monte Carlo simulation are then discussed. Finally, an example from experimental economics is used to demonstrate that the methodology can also be used in small empirical studies.