BRM CH 21

Univariate
Statistical
Analysis
2
1
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accessible website, in whole or in part.
Well, Are They Satisfied or

PrecisionMetals
Not?
employee satisfaction
survey results:
Richmond plant: 3.9
Madison plant: 3.5
Historically both plants
have had a score of
3.5.
Does a satisfaction
score of 3.9 really
mean more satisfied
employees?
H0:
Need
to compare the
The average satisfaction at the Richmond
scores.
plant
is 3.5
H1: The average satisfaction at the Richmond
plant higher than 3.5
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to a publicly accessible website, in
Types of Statistical Analysis

Univariate Statistical Analysis
Tests of hypotheses involving only one
variable.
Hypotheses about differences from some
standard
Bivariate Statistical Analysis

Tests of hypotheses involving two variables.
Relational hypotheses: examine how
changes in one variable vary with changes
in another.
Multivariate Statistical Analysis

Statistical analysis involving three or more
variables or sets of variables.
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The Hypothesis-Testing
Procedure
Process
1. The specifically stated hypothesis is
derived from the research objectives.
2. A sample is obtained and the relevant
variable is measured.
3. The measured sample value is compared
to the value either stated explicitly or
implied in the hypothesis.
If the value is consistent with the hypothesis,
the hypothesis is supported.
If the value is not consistent with the
hypothesis, the hypothesis is not supported.
Statistical Analysis: Key

Terms
Hypothesis
Unproven proposition: a supposition that
tentatively explains certain facts or
phenomena.
Null Hypothesis
Statement about the status quo.
We usually intend to reject this hypothesis
Alternative Hypothesis
Statement that indicates the opposite of the
null hypothesis.
Usually this is the hypothesis we hope to
support using sample data.
Type I and Type II Errors

Type I Error
An error caused by rejecting the null
hypothesis when it is true.
Has a probability of alpha ().
Practically, a Type I error occurs when
the researcher concludes that a
relationship or difference exists in the
population when in reality it does not
exist.

(contd)
Type II Error
An error caused by failing to reject
the null hypothesis when the
alternative hypothesis is true.
Has a probability of beta ().
Practically, a Type II error occurs
when a researcher concludes that no
relationship or difference exists when
in fact one does exist.
There are tradeoffs between type I

and type II errors.

(contd)
The Law and Type I and Type II Errors

Our legal system is based
on the concept that a
person is innocent until
proven guilty.
Type I error -> will send an
innocent person to prison.
Type II error -> guilty party
set free.
Our society places a high
value on avoiding Type I
errors, even to the extent
that Type II errors are more
likely to occur.
Significance Levels and pvalues

Significance Level
The probability of Type I error: The probability
of falsely rejecting a true null hypothesis.
The amount of error we can tolerate
Usually 1%, 5%, or 10%
p-value
Probability of observing the sample statistics
if the null hypothesis is true.
p-values are compared to significance levels to
test hypotheses.
Higher p-values equal more support for an
hypothesis.
The Freshman 7.8

College freshman gain weight,
but is it really 15 pounds (the
Freshman 15)?
Generation XL
Purdue Universitys study
found it was closer to 7.8
pounds, but are Purdue
students typical?
H0: The average number of
pounds gained in the
freshman year of college is
equal to 15.
pounds gained in the
freshman year of college is
less than 15.
The Freshman 7.8

pounds gained in the freshman
year of college is equal to 15.
pounds gained in the freshman
year of college is less than 15.
A t-test of another sample

found that the average was
significantly less than 7.8
pounds.
The Freshman 15 needs to
lose a few pounds!
EXHIBIT 21.1 p-Values
and Statistical Tests
An Example of Hypothesis
Testing
Suppose the Pizza-In restaurant is concerned
about store image before deciding whether to
expand. Pizza-In managers are most interested
in how friendly customers perceive the service to
be. A sample of 225 customers was obtained and
asked to indicate their perceptions of service on
a five-point scale, where 1 indicates very
unfriendly service and 5 indicates very
friendly service. The scale is assumed to be an
interval scale, and experience has shown that
the previous distribution of this attitudinal
measurement assessing the service dimension
was approximately normal.
Now suppose Pizza-In believes the service has to
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Testing
H1: customer perceptions of friendly service
are not equal to three.
The null hypothesis: the mean is equal to 3.0:
The alternative hypothesis: the mean is higher than 3.0:
H1: > 3.0
Testing
Suppose that the sample of 225
customers yielded an average rating of
3.78 with a standard deviation of 1.5.
We choose = 5%
3.165
Testing
Suppose that the sample of 225
customers yielded an average rating of

3.78 with a standard deviation of 1.5.
This translate into a p-value of 0.000001:
less than any traditional level of significant
If the population mean were actually 3.0,
then the probability of observing a sample
mean of 3.78 is only 0.000001.
Reject the null hypothesis. There is enough
evidence in support of the alternative
hypothesis.
Conclusion: customers believe the

service is pretty friendly.
Need to further compare with a2117
key
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EXHIBIT 21.6 The
t-Distribution for Various Degrees of

Freedom
One-Tail vs Two-Tail t-Tests

One-Tail is appropriate when a research
hypothesis implies that an observed mean can
only be greater than or less than a hypothesized
value.
Only one of the tails of the bell-shaped normal
or t curve is relevant.
When there is any doubt about whether a oneor two-tailed test is appropriate, opt for the
more conservative two-tailed test.
Both of the tails matter.
A one-tailed test can be determined from a twotailed test result by taking half of the observed
p-value.
Example 11.2
In recent years, a number of companies have
been formed that offer competition to AT&T in
international calls.
All advertise that their rates are lower than
AT&T's, and as a result their bills will be lower.
AT&T has responded by arguing that for the
average consumer there will be no difference
in billing.
Suppose that a statistics practitioner working
for AT&T determines that the mean and
standard deviation of monthly long-distance
bills for all its residential customers are $17.09
Example 11.2
He then takes a random sample of
100 customers and recalculates their
last month's bill using the rates
quoted by a leading competitor. The
average bill is $17.55.
Assuming that the standard deviation
of this population is the same as for
AT&T, can we conclude at the 5%
significance level that there is a
difference between AT&T's bills and
Example 11.2
IDENTIFY
H0: = 17.09
H1: 17.09
Example 11.2
The rejection region is set up so we can
reject the null hypothesis when the test
statistic is large or when it is small.
statissmall
statislarge
That is, we set up a two-tail rejection

region. The total area in the rejection
region must sum to , so we divide this
probability by 2.
IDENTIFY
Example 11.2
At a 5% significance level (i.e. = .

05), we have /2 = .025. Thus, z.025
= 1.96 and our rejection region is:
1.984
1.984
Example 11.2
COMPUTE
We can also find that our

standardized test statistic is 1.19
Since 1.19 is not greater than 1.984,
nor less than 1.984 we cannot reject
the null hypothesis in favor of H1.
That is there is insufficient
evidence to infer that there is a
difference between the bills of
AT&T and the competitor.
COMPUTE
Two-Tail Test p-value
We can also find that p-value to be

0.234. We interpret the p-value of .
234 as a high possibility to get a
sample mean of 17.55 when the
population mean is 17.09.
Summary of One- and TwoTail Tests

One-Tail Test
(left tail)
Two-Tail Test
One-Tail Test
(right tail)
The Chi-Square Test for Goodness of Fit
Chi-square (2) test

Tests for statistical significance.
Is particularly appropriate for testing
hypotheses about frequencies
arranged in a frequency or
contingency table.
Goodness-of-Fit (GOF)
A general term representing how well
some computed table or matrix of
values matches some population or
predetermined table or matrix of the
same size.
2128
The Chi-Square Test for

Goodness of Fit: An Example
H1: Papa John 's Pizza stores are more
likely to be located in a standalone
location than in a shopping center.
A competitor is interested in this
hypothesis as part of the competitor
analysis in a marketing plan. A
researcher for the competitor gathers a
random sample of 100 Papa John's
locations in California (where the
competitor is located).
The Chi-Square Test for Goodness of Fit: An

Example
The following observations are recorded in a
frequency table.
If no pattern exists in the locations, they should

be distributed randomly and evenly across the
two categories.
The Chi-Square Test for Goodness of Fit: An

Example
For the Chi-Square test for goodness of fit,
the null hypothesis is rejected at the right-tail
of the distribution.
The p-value for the example is 0.0455.
The alternative hypothesis H1 is supported.
More Papa Johns restaurants are located in
standalone locations.

BRM CH 21

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Univariate

2013 Cengage Learning. All Rights

Well, Are They Satisfied or

Types of Statistical Analysis

Bivariate Statistical Analysis

Multivariate Statistical Analysis

Statistical Analysis: Key

Type I and Type II Errors

Type I and Type II Errors

There are tradeoffs between type I

Type I and Type II Errors

The Law and Type I and Type II Errors

Significance Levels and pvalues

The Freshman 7.8

The Freshman 7.8

A t-test of another sample

EXHIBIT 21.1 p-Values

and Statistical Tests

The alternative hypothesis: the mean is higher than 3.0:

H1: > 3.0

customers yielded an average rating of

Conclusion: customers believe the

EXHIBIT 21.6 The

t-Distribution for Various Degrees of

One-Tail vs Two-Tail t-Tests

That is, we set up a two-tail rejection

At a 5% significance level (i.e. = .

We can also find that our

We can also find that p-value to be

Summary of One- and TwoTail Tests

The Chi-Square Test for Goodness of Fit

Chi-square (2) test

The Chi-Square Test for

The Chi-Square Test for Goodness of Fit: An

If no pattern exists in the locations, they should

The Chi-Square Test for Goodness of Fit: An

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