Introduction To Probability & Statistics: Lecture - 15/16

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Introduction to Probability & Statistics
Lecture - 15/16
Prof. Pritam Ranjan

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Motivating examples
• Hoping to improve customer service, a retailer sent a sample of 85
salespeople to a training program that emphasized self-image, respect
for others, and manners. Management decided that if the rate of
complaints fell below 10% per month after the training, it would judge
the program a success.
Test µ < 0.1 vs. µ ≥ 0.1
• According to Fortune, on February 27, 2007, the average stock in all

U.S. exchanges has a drop of 3.3%. If a random sample of 120 stocks
reveals an average drop of 2.8% on that day and a standard deviation of
1.7%, are there grounds to reject the magazine’s claim?
Test µ = 3.3 vs. µ �= 3.3
Pritam Ranjan / OM&QT 1

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Hypothesis testing
• Two important hypotheses:
Ha : Researcher’s claim - hypothesis / Alternative hypothesis
H0 : Null hypothesis
• Examples:
Ha : p < p0 vs. H0 : p ≥ p0 Ha : µ < µ0 vs. H0 : µ ≥ µ0
Ha : p > p0 vs. H0 : p ≤ p0 Ha : µ > µ0 vs. H0 : µ ≤ µ0
Ha : p �= p0 vs. H0 : p = p0 Ha : µ �= µ0 vs. H0 : µ = µ0
• Important rules:
→ ”Equality” sign always stays with H0
→ H0 is ”always” the compliment of Ha

IPS
Motivating examples
• Hoping to improve customer service, a retailer sent a sample of 85
salespeople to a training program that emphasized self-image, respect
for others, and manners. Management decided that if the rate of
complaints fell below 10% per month after the training, it would judge
the program a success.
Test µ < 0.1 vs. µ ≥ 0.1
• According to Fortune, on February 27, 2007, the average stock in all

U.S. exchanges has a drop of 3.3%. If a random sample of 120 stocks
reveals an average drop of 2.8% on that day and a standard deviation of
1.7%, are there grounds to reject the magazine’s claim?
Test µ = 3.3 vs. µ �= 3.3

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Hypothesis test for p

• Example 1: A pharmaceutical company is advertising that in more than
70% cases of migraine, ”ibuprofen” is preferred over ”asprin”. You
conducted a survey on 25 randomly chosen individuals with migraine,
and found that 18 patient preferred ”ibuprofen” over ”asprin”. Test the
claim made by the pharmaceutical company.
Random variable:
Data:
Parameter of interest:
Hypotheses : H0 : vs. Ha :

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Defining H0 and Ha
• Should we use Ha : p > 0.7 vs. H0 : p ≤ 0.7
OR
Ha : p < 0.7 vs. H0 : p ≥ 0.7
H0 : “he is a rapist” OR “he is not a rapist”

H0 : “he is Covid+” OR “he is not Covid+”

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Hypothesis test for p

Test procedure for H0 : vs.Ha :
1. Find a good estimator of p
– ”large value of Xobs ” is consistent with ”large values of p”?

– i.e., large value of Xobs is consistent with Ha
2. Build a sensible decision rule (rejection region):

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Hypothesis testing
A few important points
1. We do not know the truth.
2. Based on the observed data, we have to support either H0 or Ha
3. Of course, we cannot be certain (i.e., there is some room for error)

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Hypothesis testing

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Hypothesis testing

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Type I, II errors - Summary

• Type I error:
– maximum P(Type I error) is also called ”Type I error rate”
– maximum P(Type I error) is denoted by α
– α is also called ”level of significance”
– P(Type I error) is maximized at the boundary of H0 and Ha
• Type II error:
– P(Type II error) is always computed for a given fixed p ∈ Ha
– P(Type II error at p ∈ Ha ) is denoted by β(p)
– Power of a test K (p) = 1 − β(p)

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“Good” test
• Objective: built a test that minimizes both Type I and Type II errors
• Define H0 , Ha assuming you want to be more careful when rejecting H0 .

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“Good” test (contd.)

• Example 1: A company is advertising that in more than 70% cases of
migraine, ”ibuprofen” is preferred over ”asprin”. Survey on 25 individuals
found that 18 patient preferred ”ibuprofen” over ”asprin”. Test the claim
made by the company.
Recall: H0 : vs. Ha :
Test statistic: X ∼
Observed: Xobs =
Decision rule: reject H0 if
Maximum Type I error probability:
α = P(Reject H0 |p = p0 )
= P(X ≥ |p = )

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(1) Critical Value Approach
(2) P-value Approach

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Critical value approach

Hypothesis of interest
H0 : p ≥ p0 vs. H a : p < p0
(1) Assume a random sample from Ber (p)

(2) Test statistic: X - the number of successes in n trials
(3) Exact distribution: X ∼ bin(n, p)
(4) Approximate distribution: X ∼ N(np, npq)
(5) Decision rule: reject H0 if Xobs is too small

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H0 : p ≥ p0 vs. H a : p < p0

How small is small?

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H0 : p ≥ p0 vs. H a : p < p0

How small is small?
(5) Decision rule: reject H0 if Xobs ≤ C

How to find a reasonable C (aka - the critical value)?

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H0 : p ≥ p0 vs. H a : p < p0

• Exact distribution: X ∼ bin(n, p)

• Approximate distribution: X ∼ N(np, npq)

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H0 : p ≥ p0 vs. H a : p < p0

(5) Decision rule: reject H0 if (using approx sampling distr under H0 )
Xobs − np0
√ ≤ C∗
np0 q0

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H0 : p ≥ p0 vs. H a : p < p0

Xobs − np0
√ ≤ C∗
np0 q0
What is C ∗ ?

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H0 : p ≥ p0 vs. H a : p < p0

Xobs − np0
√ ≤ C∗
np0 q0
(6) Given a (small) level of significance α
C ∗ = −Zα lower α quantile of N(0, 1)

(e.g., if α = 0.05, the value of C ∗ = −1.645)

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Summary of hypotheses for p

Assume: X ∼ bin(n, p) ≈ N(np, npq)
Ha Decision Rule

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Example
Out of all the air-travel bookings in major airlines, at least 58% are said to be
done online. A sample of 70 airlines revealed that 52% of bookings for last
year were done online. State the null and alternative hypotheses and carry
out the test at the 5% level of significance.

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Example (...)
In a random sample of 30 students at IIMI it was found that 22 use non-Apple

laptops. Test at α = 0.05 if there is sufficient evidence to conclude that over
60% of the students use non-Apple laptops.

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Example (...)
A random sample of 150 recent donations at a certain blood bank reveals

that 82 were type A blood. Does this suggest that the actual percentage of
type A donations differs from 40%, the percentage of the population having
type A blood? Carry out a test of the appropriate hypotheses using a
significance level of α = 0.01. Would your conclusion have been different if a
significance level of α = 0.05 had been used?

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Method - 2 for hypothesis testing
P-value method

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Introduction to Probability & Statistics

Prof. Pritam Ranjan

Test µ < 0.1 vs. µ ≥ 0.1

• According to Fortune, on February 27, 2007, the average stock in all

Test µ = 3.3 vs. µ �= 3.3

Pritam Ranjan / OM&QT 1

Pritam Ranjan / OM&QT 2

Test µ < 0.1 vs. µ ≥ 0.1

• According to Fortune, on February 27, 2007, the average stock in all

Test µ = 3.3 vs. µ �= 3.3

Pritam Ranjan / OM&QT 3

Hypothesis test for p

Pritam Ranjan / OM&QT 4

H0 : “he is a rapist” OR “he is not a rapist”

Pritam Ranjan / OM&QT 5

Hypothesis test for p

1. Find a good estimator of p

– ”large value of Xobs ” is consistent with ”large values of p”?

2. Build a sensible decision rule (rejection region):

Pritam Ranjan / OM&QT 6

Pritam Ranjan / OM&QT 7

Pritam Ranjan / OM&QT 8

Pritam Ranjan / OM&QT 9

Type I, II errors - Summary

Pritam Ranjan / OM&QT 10

• Deﬁne H0 , Ha assuming you want to be more careful when rejecting H0 .

Pritam Ranjan / OM&QT 11

“Good” test (contd.)

Decision rule: reject H0 if

Maximum Type I error probability:

Pritam Ranjan / OM&QT 12

(1) Critical Value Approach

(2) P-value Approach

Pritam Ranjan / OM&QT 13

Critical value approach

(1) Assume a random sample from Ber (p)

Pritam Ranjan / OM&QT 14

Critical value approach

(1) Assume a random sample from Ber (p)

How small is small?

Pritam Ranjan / OM&QT 15

Critical value approach

(1) Assume a random sample from Ber (p)

How small is small?

(5) Decision rule: reject H0 if Xobs ≤ C

Pritam Ranjan / OM&QT 16

Critical value approach

(5) Decision rule: reject H0 if Xobs ≤ C

• Exact distribution: X ∼ bin(n, p)

Pritam Ranjan / OM&QT 17

Critical value approach

(5) Decision rule: reject H0 if Xobs ≤ C

Pritam Ranjan / OM&QT 18

Critical value approach

(5) Decision rule: reject H0 if Xobs ≤ C

Pritam Ranjan / OM&QT 19

Critical value approach

(5) Decision rule: reject H0 if Xobs ≤ C

C ∗ = −Zα lower α quantile of N(0, 1)

Pritam Ranjan / OM&QT 20

Summary of hypotheses for p