Question

Will improving customer service result in higher stock prices for the companies providing the better service? "When a company's satisfaction score has improved over the prior year's results and is above the national average (currently 75.7), studies show its shares have a good chance of outperforming the broad stock market in the long run." The following satisfaction scores of three companies for the 4th quarters of two previous years were obtained from the American Customer Satisfaction Index. Assume that the scores are based on a poll of 68 customers from each company. Because the polling has been done for several years, the standard deviation can be assumed to equal 8 points in each case.

Company Year 1 Score Year 2 Score

Rite Aid 74 78

Expedia 78 81

J.C. Penney 72 80

a. For Rite Aid, is the increase in the satisfaction score from year 1 to year 2 statistically significant? Use x= 0.05 and null hypothesis is h0: u1-u2 <=0 . What can you conclude?

z value (to 2 decimals)

p-value (to 4 decimals)

b. Can you conclude that the year 2 score for Rite Aid is above the national average of 75.7? Use x=0.05 and null hypothesis is . Enter negative value as negative number.

z value (to 2 decimals)

p-value (to 4 decimals)

c. For Expedia, is the increase from year 1 to year 2 statistically significant? Use and null hypothesis is .

z value (to 2 decimals)

p-value (to 4 decimals)

d. When conducting a hypothesis test with the values given for the standard deviation, sample size, and , how large must the increase from Year 1 to Year 2 be for it to be statistically significant? (to 2 decimals)

e. Use the result of part (d) to state whether the increase for J.C. Penney from year 1 to year 2 is statistically significant.

The increase () statistically significant.

Answer 1