Drawing Conclusions from Experiments

The transportation network company, Unter Technologies, is interested in increasing its revenue. Its CEO hypothesizes that the firm would generate substantially greater profits if it lowered its per-ride costs and profit margins.

Unter conducts an experiment on how its sales are sensitive to price reductions by offering a 25% discount for all of its services for one day. To their pleasant surprise, Unter sees a huge spike in sales and profits during the promotional day.

Seeing the results of this experiment, Unter's CEO decides that Unter should lower its prices permanently. Why might this conclusion be a bit hasty?

Possible Answers

Unter did not survey its customers to determine if they were enticed by Unter's lower prices.
Unter does not have enough data to test the statistical significance of its findings.
The treatment in Unter's experiment might not have the same effect as the treatment in their policy proposal.
Unter's experiment didn't address the strategic responses of its competitors.

Exercise

Drawing Conclusions from Experiments

Instructions

Possible Answers