# solution

How workers respond to wage cuts. Refer to the Institute for the Study of Labor: Discussion Paper Series (March 2011) study of how workers respond to wage cuts, Exercise 9.22 (p. 543). Recall that teams of workers were divided into three wage cut groups: â€œunilateral wage cut,â€ â€œgeneral wage cut,â€ and â€œbaselineâ€ (no wage cut). The researchers determined that the average decrease in promotional cards sold differed depending on the wage cut treatment group. Now the researchers want to rank the treatment means by making all possible pairwise comparisons.

a. How many pairwise comparisons make up this phase of the study? List them.

b. Why is a multiple comparisons procedure like Tukeyâ€™s recommended for the analysis?

c. The confidence interval for the difference between the means for â€œbaselineâ€ and â€œgeneral wage cut,â€ i.e., for (baseline Â general), includes only positive values. Interpret this result.

Exercise 9.22

How workers respond to wage cuts. A randomized field experiment was carried out to determine how workers respond to wage cuts and the results published in Institute for the Study of Labor: Discussion Paper Series (March 2011). A company formed teams of two employees to sell promotional cards at the same hourly wage. After a short period of time on the job, teams were unknowingly randomly assigned to one of three treatments. In the â€œunilateral wage cutâ€ treatment, one workerâ€™s pay was cut by 25%; in the â€œgeneral wage cutâ€ treatment, both workersâ€™ pay was cut by 25%; and in the â€œbaselineâ€ treatment, neither worker received a pay cut. The variable of interest was the decrease in the number of promotional cards sold after implementation of the pay cuts. The researchers wanted to know if the average decrease in cards sold differed depending on whether one or more of the workers received a pay cut.

a. Identify the type of experimental design used in the study.

b. Identify the dependent variable of interest.

c. What is the factor in this experiment? The factor levels?

d. Specify the null hypothesis of interest to the researchers.

e. The ANOVA F-test was carried out and resulted in a p-value less than .001. Interpret these results using Â = .01.

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