HYPOTHESIS TESTING Fall 2013 Nov 14/15

HYPOTHESIS TESTING Test assumptions about population parameters using a sample. Example: The mean age of targeting consumers is believed to be 35 years old. Conduct a random survey and it returns a sample mean of age 33. Question: Should this information change the belief about consumers’ mean age?

STEPS OF HYPOTHESIS TESTING

Step 4. Decision rule Critical value method: Compare test statistics with appropriate critical values. If the test statistics fall in the rejection region, reject the null in favor of the alternative. Otherwise fail to reject the null. P-value method: Compute p-value. If p-value < α, reject the null hypothesis. Both methods should yield the same conclusion. Never accept the null hypothesis; only fail to reject it.

DECISION RULES-CRITICAL VALUE Critical Value

DECISION RULES-CRITICAL VALUE Critical Value

DECISION RULES-CRITICAL VALUE Critical Value

CRITICAL VALUES TestCritical valuesExcel command Two-tailed NORM.S.INV(1- α /2) T.INV(1- α /2, df) Right-tailed NORM.S.INV(1- α ) T.INV(1- α, df) Left-tailed NORM.S.INV( α ) T.INV( α, df)

P-VALUES TestP-valueExcel command Left-tailed Right-tailed Two-tailed