Generalizing Experimental Results

Unter's CEO is still convinced that lowering the prices of their services might increase the company's profits. He is hesitant to lower Unter's prices for a longer period, since the company would risk losing a great deal of income if the price-drop did not substantially increase revenue.

Therefore, to understand how a long-term price drop would affect Unter's profits, the CEO of Unter decides to drop the prices of their services in one city. Over the course of a year, Unter's profits in that city rose substantially. Unter's CEO is now convinced that he should drop Unter's prices nation-wide. Why might this conclusion still be too hasty?

Possible Answers

Unter's experiment did not pay attention to how its changes affected its competitors.
The context in Unter's experiment might not generalize to other contexts affected by Unter's policy proposal.
Unter's experiment did not specify why people might be enticed by lower prices.
Unter's experiment did not control for noncompliance.

Exercise

Generalizing Experimental Results

Instructions

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