In testing if promotions (binary) P_i have an effect on sales, S_i with a null hypothesis that the average treatment effect is zero, the null hypothesis could be written as: A) E [S_i (P_i= 1) - S_i (P_i= 0)] = 0 B) E [P_i- S_i ] = 0 C) E [P_i- S_i ] = 1 D) E [S_i (P_i= 1) - S_i (P_i= 0)] = ETT

Question

Quizplus · Accepted Answer

The null hypothesis should state that the average treatment effect is zero, which is captured by subtracting the outcome variable (sales) when the promotion is present from when it is not present and taking their expected value. Therefore, the correct formulation is E [S_i (P_i= 1) - S_i (P_i= 0)] = 0. B and C are incorrect because they do not include the outcome variable in the formulation of the null hypothesis. D is incorrect because ETT (expected treatment effect) is not equal to zero and is not a statement of the null hypothesis.

In Testing If Promotions (Binary) Pi Have an Effect on Sales

In Testing If Promotions (Binary) P_i Have an Effect on Sales