Advanced Hypothesis Testing Paper

Advanced Hypothesis Testing Paper

Five business students, with a University of Phoenix learning team, noticed the recent increases of regular unleaded gasoline prices. The students hypothesized the gas prices consumed from corporate stations are not the same price as if purchased from a generic station in a grocery store parking lot, with a confidence interval of 90%. The research team decided to limit the current research to the Houston, Texas area. The students would take a sample, in the natural environment, to include five corporate gas stations and five different grocery stores around Houston.

Retailers, such as Wal-Mart, Kroger, and Randall's (big box retailers), are capturing a growing percentage of the market share of gasoline sales from conventional convenience formats, and additionally, have helped to reduce the mean price of gasoline through lower profit margins and competitive practices. Research indicates since the inception of big box retailers, during mid-1980 into the fuel sales market, overall corporate convenience-store fuel sales have decreased by an average of 13% on a national scale (American Independent Business Alliance, 2005). This decrease is estimated to rise by as much as 16% by 2007 and is likely to continue as retail giants such as Wal-Mart and Kroger vie for fuel sales as an incentive to lure more customers into their stores. At the pump advertising, discount cards, and free-gas with in-store purchases are just a few incentives that big box retailers are offering consumers to keep him or her in the stores and these tactics seem to be paying off. Typical profit margins, for big box retailers, in gasoline average about 8% for each gallon of gas sold and are a far reach from corporate gasoline outlets before big box retailers entered the market. Markups of over 20% were once the norm for convenience outlets on gasoline, but profit margins have narrowed drastically as convenience stores try to compete with an ever growing threat from big box operators (American Independent Business Alliance, 2005). Food and drug retailers have little concern with profit margins in gasoline sales while convenience store owners rely heavily on gasoline profits as the principle form of revenue from their business. Only time will tell how convenience stores will choose to combat the seemingly unfair advantage that the big box retailers hold in this area.

Hypothesis Statement

The research team set up their hypothesis test by following the statical hypothesis five-step rule. The alternative hypothesis statement is the outcome the researchers believe is true. In this case, the team states: Alternative hypothesis is the mean average (mu) of regular gas price in the Houston, Texas area will vary in cents per gallon from one gas station to the next, over the next five days. The educated assumption implies the null hypothesis to state there will not be a variance in the gas price between the corporate stations and the grocery store stations. In order to accept or reject the null hypothesis, the researchers collected data documenting the regular gasoline price from each of the mentioned gas stations. The researchers concurred that the hypothesis is to be equal to a 90% confidence level. The level of significance for the two-tailed test is 0.10, leaving the rejection region in the upper or lower tail -2.021> t >2.021. The team will reject the null hypothesis if "t" is greater than 2.201 or if "t" is less than -2.021.

Data Collected

Data received from the Energy Information Administration's web site states the "U.S. Retail Gasoline Prices" on a weekly basis (Weekly U.S. Retail Gasoline Prices, 2006). The national average of regular grade gasoline for the week prior to March 20, 2006 was $2.504 per gallon, while the average for the State of Texas was $2.463 per gallon. The Energy Information Administration's web site stated the average retail price for Houston was $2.45 per gallon of regular grade gasoline (Weekly U.S. Retail Gasoline Prices, 2006).

The Grocery store fuel center on the corner of Dairy Ashford and Briar Forrest in West Houston is unique in some respects because the store is at least two or three miles from any other retail fuel outlets. Given the intense level of competition among retail gasoline outlets in the Houston metropolitan area and the large number of gas stations, the absence of a competitor within a close proximity of a fuel station is not a common thing. Since most retail outlets base their gas prices upon the prices of their competitors, this grocery store gas station has the advantage of not having to match or closely mirror the gasoline prices of its closest competitor.

Another grocery store fuel center where data was collected is at Loop 336 and 105 West in Conroe, Texas.