Question

11. Franchise businesses are sometimes given an exclusive territory by contract. This means that the new outlet will not have to compete with other outlets of the same chain within its own territory. If researchers were interested in understanding how the presence of an exclusive-territory clause in the contract relate to the survival of the business, which statistical test would you perform to answer this question (state the hypotheses)? Assume a simple random sample of 170 new franchises recorded two categorical variables for each firm: (1) whether the firm was successful or not (based on economic criteria) and (2) whether or not the firm had an exclusive-territory contract (1 0 I

Answer 1

The Chi-Square test of Independence is the appropriate statistical test here since we have two categorical variables.