Just and Chern claimed that the buyers ofCalifornia canning tomatoes exercised m

Question

Just and Chern claimed that the buyers ofCalifornia canning tomatoes exercised market power to fix prices.As proof, investigators estimated price elasticity of demand fortomatoes in 2 periods--before and after the introduction ofmechanical harvesters. (An elasticity of -5, for instance, meansthat a 1% increase in prices causes a 5% drop indemand.)
In competitive market, the harvestershould make no difference in demand elasticity. However, thedifference between the two estimated elasticities--pre-harvesterand post-harvester--was almost statistically significant (z=1.56and P=5.9% one-tailed). The investigators tried several ways ofestimating price elasticity before settling on the finalversion.
Comment briefly on the use of statisticaltests.
I was thinking that the problem with thistest of significance is that there should have been two tailsbecause it's examining two separate and independent events, and theP=5.9% should have been 11.8%, which would not have been near thestatistically significant area. Am I on the righttrack?
Any help would be greatlyappreciated!!
In competitive market, the harvestershould make no difference in demand elasticity. However, thedifference between the two estimated elasticities--pre-harvesterand post-harvester--was almost statistically significant (z=1.56and P=5.9% one-tailed). The investigators tried several ways ofestimating price elasticity before settling on the finalversion.
Comment briefly on the use of statisticaltests.
I was thinking that the problem with thistest of significance is that there should have been two tailsbecause it's examining two separate and independent events, and theP=5.9% should have been 11.8%, which would not have been near thestatistically significant area. Am I on the righttrack?
Any help would be greatlyappreciated!!

Explanation / Answer

Given that, z=1.56 and P=5.9% one-tailed Our calculated Z value is 1.56 with P-value 0.059 So the difference between two estimated elasticities wassignificant at 0.10 level of significance Your assumption is wrong , Here we can use only one tailedtest. In your assumption the difference between two estimatedelasticities was insignificant at 0.10 level of significance So itis wrong.

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