Recall our AirBnB example:

airbnb <- read.csv("../Datasets/portland-airbnb-listings.csv")
airbnb$price <- as.numeric(gsub("$", "", airbnb$price, fixed=TRUE))
airbnb$instant_bookable <- (airbnb$instant_bookable == "t")
instant <- airbnb$price[airbnb$instant_bookable]
not_instant <- airbnb$price[!airbnb$instant_bookable]
(tt <- t.test(instant, not_instant))

## 
##  Welch Two Sample t-test
## 
## data:  instant and not_instant
## t = 3.6482, df = 5039.8, p-value = 0.0002667
## alternative hypothesis: true difference in means is not equal to 0
## 95 percent confidence interval:
##   4.475555 14.872518
## sample estimates:
## mean of x mean of y 
##  124.6409  114.9668

How’s the $t$ test work?

The central limit theorem.

In words:

The number of standard errors that the sample mean is away from the true mean has a $t$ distribution.

For instance, the probability that the sample mean is within 2 standard errors of the true mean is approximately

$$\begin{array}{r}{\int }_{-2}^2\frac{\mathrm{\Gamma }\left(\frac{n-1}{2}\right)}{\sqrt{(n-2)\pi }\mathrm{\Gamma }\left(\frac{n-2}{2}\right)}{(1+\frac{x^2}{n-2})}^{-\frac{n-1}{2}}dx.\end{array}$$

Intuition

1. Simulate a dataset of 20 random draws from a Normal distribution with mean 0, and do a $t$ test of the hypothesis that $\mu =0$.

A 95% confidence interval for an estimate is constructed so that no matter what the true values, 95% of the the confidence intervals you construct will overlap the truth.

How’s that work?

How’s that work?

Check this.

if we collect 100 independent samples from a population with true mean $\mu$, and construct 95% confidence intervals from each, then about 95 of these should overlap $\mu$.

Let’s take independent samples of size $n=20$ from a Normal distribution with $\mu =0$. Example:

n <- 20; mu <- 0
t.test(rnorm(n, mean=mu))$conf.int

## [1] -0.4019083  0.5862080
## attr(,"conf.level")
## [1] 0.95

tci <- replicate(300, t.test(rnorm(n, mean=mu))$conf.int)
mean(tci[1,] > 0 | tci[2,] < 0)

## [1] 0.05

What’s that 95% mean?

Suppose we survey 100 random UO students and find that 10 had been to a party recently and so get a 95% confidence interval of 4%-16% for the percentage of UO students who have been to a party recently.

Statistical power is how good our statistics can find things out.

A prospective study

Suppose that we’re going to do a survey of room prices of an AirBnB competitor. How do our power and accuracy depend on sample size? Supposing that prices roughly match AirBnB’s: mean $\mu =$ $120 and SD $\sigma =$ $98, estimate:

1. The size of the difference between the mean price of a random sample of size n and the (true) mean price.

2. The probability that a sample of size n rooms has a sample mean within $10 of the (true) mean price.

Group exercise

Answer those questions empirically: by taking random samples from the price column of the airbnb data, make two plots:

1. Expected difference between the mean price of a random sample of n Portland AirBnB rooms and the (true) mean price of all rooms, as a function of n.

2. Probability that a sample of size n of Portland AirBnB rooms has a sample mean within $10 of the (true) mean price of all rooms, as a function of n.

In class: part 1

true_mean <- mean(airbnb$price, na.rm=TRUE)
# do it once
n <- 20
sample_mean <- mean(sample(airbnb$price, n))
# do it a lot of times
nvals <- 10 * 10:100
nreps <- 100
sample_means <- matrix(NA, nrow=nreps, ncol=length(nvals))
for (j in 1:length(nvals)) {
    n <- nvals[j]
    sample_means[,j] <- replicate(nreps, mean(sample(airbnb$price, n), na.rm=TRUE))
}
plot(nvals, colMeans(abs(sample_means - true_mean)),
     main="distance from the true mean, by sample size",
     xlab="sample size",
     ylab="mean absolute error",
     pch=20)

In class: part 2

plot(nvals, colMeans(abs(sample_means - true_mean) < 10),
     xlab='sample size',
     ylab='Prob(error < 10)',
     main='probability sample mean is within $10 of true mean',
     pch=20)