Question

Your firm will base some expensive decisions on the results of your hypothesis test, so your boss wants to have a high standard of evidence for rejecting the null hypothesis. What should you do?

Answer 1

Your firm will base some expensive decisions on the results of your hypothesis test, so your boss wants to have a high standard of evidence for rejecting the null hypothesis. What should you do?

- In statistical testing, type I error is the rejection of a true null hypothesis. To have a high standard of evidence for rejecting the null hypothesis, we should try to minimize possibility of type I error.

Type I error can be minimized by picking a smaller level of significance α before doing a hypothesis test.

As the level of significance α of a hypothesis test is the same as the probability of a type 1 error. Thus, by setting it lower, automatically reduces the probability of a type 1 error.

It means you need stronger evidence against the null hypothesis H0 before you will reject the null. Therefore, if the null hypothesis is true, you will be less likely to reject it by chance.