Asked Feb 19, 2020

Denomination Effect In the article “The Denomination Effect” by Priya Raghubir and Joydeep Srivastava, Journal of Consumer Research, Vol. 36, researchers reported results from studies conducted to determine whether people have different spending characteristics when they have larger bills, such as a $20 bill, instead of smaller bills, such as twenty $1 bills. In one trial, 89 undergraduate business students from two different colleges were randomly assigned to two different groups. In the “dollar bill” group, 46 subjects were given dollar bills; the “quarter” group consisted of 43 subjects given quarters. All subjects from both groups were given a choice of keeping the money or buying gum or mints. The article includes the claim that “money in a large denomination is less likely to be spent relative to an equivalent amount in smaller denominations.” Test that claim using a 0.05 significance level with the following sample data from the study. 

Group 1
Subjects Given $1 Bill
X = 12
n, = 46
Group 2
Subjects Given 4 Quarters
X2 = 27
nz = 43
Spent the money
Subjects in group

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Group 1 Subjects Given $1 Bill X = 12 n, = 46 Group 2 Subjects Given 4 Quarters X2 = 27 nz = 43 Spent the money Subjects in group


Expert Answer

Step 1

The hypotheses are given below:

Null hypothesis:

H0:p1= p2

Alternative hypothesis:

H1:p1< p2



Step 2

Test statistic and P-value:

Test statistic for z-test:

There are 12 successes in the sample of size 46 from the first group and 27 successes in a sample size 43 from the second group. The pooled sample proportion can be calculated as follows:

Statistics homework question answer, step 2, image 1


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