PiggyBank has narrowed its options down to two incentive plans: A. cash back when the consumer makes an online purchase; and B. cash back when the consumer makes a purchase at a clothing store. The bank doesn't know whether consumers would shop online more than at clothing stores.
Information Experts has placed you in a group to develop null and alternative hypotheses to help the bank determine which option would provide the best incentive to consumers. Work to develop the null and alternative hypotheses, write a brief memo to the PiggyBank product development team describing your hypotheses and explaining how you arrived at them.
1. Explain hypothesis testing in layman terms
Setting critical areas (cutoff beliefs)
How to get the data
z or t test? Tell me which one Piggy Bank should use and why?
Types of hypothesis tests, differences, which one Piggy Bank will use
2. Explain how the test will help Piggy Bank make their decision
3. Set up the null and alternative for Piggy Bank's problem
4. Errors discussed in layman's terms
5. Decision assuming null is correct
This solution explains the function and processes of hypothesis testing and how data collection for the test can be conducted. It also differentiates between a t-test and z-test and give step-by-step explanations on how Piggy Bank will make their decision by conducting a five-step hypothesis testing.