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Hypothesis Testing and Business Decisions

Hypothesis testing is a well-structured process that consists of several logical steps, and it aims at refining a business decision. Hypothesis testing is a quite common technique used by researchers.
- What are the steps to conduct a hypothesis test? How does a researcher determine which statistical test to conduct?
- How does a researcher determine which level of significance to use?
- What software programs can be used to compute these tests? Where is the critical test value found?
- How can one determine if the null hypothesis should be rejected?
- Give a business example on each of the three possible cases of hypothesis testing. Do you think the rejection region will be different in each one of the three cases? Why? Why not?

Solution Preview

1. The steps to conduct a hypothesis test are:

-state the research question
-specify your hypotheses (null and alternative)
-calculate test statistic
-compute the probability of test static (i.e. p-value) or the rejection region. The first one is known as the p-value approach, while the second is known as the rejection region (or critical region) approach.
-state conclusion.

For junior researchers who doesn't know much about statistical tests yet, there are tables that can help them to determine which test to use.
Here is an example: After you state your research question, you can then refer to this table and find the the most suitable tests for your project.

2. How ...

Solution Summary

The solution discusses hypothesis testing and business decisions.