BRM CH 21

21
Univariate Statistical
Analysis
2013 Cengage Learning. All Rights Reserved. May

not be scanned, copied or duplicated, or posted to a
publicly accessible
website,
in whole
or in part.
2013
Cengage
Learning.
All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Well, Are They Satisfied or Not?

PrecisionMetals 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?
Need to compare the
scores.
H0: The average satisfaction at the Richmond plant is 3.5
H1: The average satisfaction at the Richmond plant higher
than 3.5
2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
21-2
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.
Hypotheses about differences between groups
213
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.
214
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.
215
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.
216
Type I and Type II Errors (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.
217
Type I and Type II Errors (contd)
218
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.
21-9
Significance Levels and p-values

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.
2110
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.
is less than 15.
21-11
The Freshman 7.8

is equal to 15.
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!
21-12
EXHIBIT 21.1
p-Values and Statistical Tests
2113
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 be higher
than 3 before a decision about expansion can be made.
21-(#)

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
2115

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
2116

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 a key competitor
2117
EXHIBIT 21.6
The t-Distribution for Various Degrees of

Freedom
2118
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 one- or
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 pvalue.
2119
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 and $3.87, respectively.
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 those
of the leading competitor?
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.
stat is small
stat is large
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.
Two-Tail Test p-value COMPUTE

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 Two-Tail

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).
2129
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.
2130
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.
2131

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21

2013 Cengage Learning. All Rights Reserved. May

Well, Are They Satisfied or Not?

Does a satisfaction score of

Types of Statistical Analysis

Bivariate Statistical Analysis

Multivariate Statistical Analysis

The Hypothesis-Testing Procedure

Statistical Analysis: Key Terms

Type I and Type II Errors

Practically, a Type I error occurs when the

Type I and Type II Errors (contd)

There are tradeoffs between type I and

Type I and Type II Errors (contd)

The Law and Type I and Type II Errors

Significance Levels and p-values

The Freshman 7.8

The Freshman 7.8

A t-test of another sample found

p-Values and Statistical Tests

An Example of Hypothesis Testing

An Example of Hypothesis Testing

The alternative hypothesis: the mean is higher than 3.0:

H1: > 3.0

An Example of Hypothesis Testing

An Example of Hypothesis Testing

Conclusion: customers believe the service is

The t-Distribution for Various Degrees of

One-Tail vs Two-Tail t-Tests

That is, we set up a two-tail rejection region. The

At a 5% significance level (i.e. = .05), we

We can also find that our standardized test

Two-Tail Test p-value COMPUTE

Summary of One- and Two-Tail

The Chi-Square Test for Goodness of Fit

The Chi-Square Test for Goodness of

The Chi-Square Test for Goodness of Fit:

If no pattern exists in the locations, they should be

The Chi-Square Test for Goodness of Fit:

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