In a binary logit analysis with unequal sample frequencies of the twooutcomes the less frequent outcome always has lower estimatedprediction probabilities than the other one. This effect is unavoidable,and its extent varies inversely with the fit of the model, as given by anew measure that...

A bank employs logistic regression with state-dependent sample selection to identify loans thatmay go wrong. Inspection shows that the logit model is inappropriate. A bounded logit model witha ceiling of (far) less than 1 fits the data much better.