Le Zhang (University of New South Wales – Australian School of Business – School of Economics) & Andreas Ortmann (University of New South Wales – Australian School of Business) have recently published online a working paper entitled “Exploring the Meaning of Significance in Experimental Economics“.
Abstract: Null Hypothesis Significance Testing has been widely used in the experimental economics literature. Typically, attention is restricted to type-I-errors. We demonstrate that not taking type-II errors into account is problematic. We also provide evidence, for one prominent area in experimental economics (dictator game experiments), that most studies are severely underpowered, suggesting that their findings are questionable. We then illustrate with several examples how poor (no) power planning can lead to questionable results.
Keywords: Null Hypothesis Significance Testing, Type-I-errors, Type-II errors, Significance level, Statistical power.
JEL Classification: A10, B23, C12.