Causal Designs

Questions

Will higher trade discount

increase sale?

Will increase salary retain good

Salesmen in the company?
Testing cause-effect
Will change in packaging relationship
improve brand image?
Will outsourcing after sale
service improve customer
Satisfaction?

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Terminology in causal designs

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 Will higher trade discount increase sale?

INDEPENDENT VARIABLES

Factor Trade discount DEPENDENT

VARIABLE
Advertising exp.

Ability of salesman
Confounding Sale
variables Market potential

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Factor : Trade discount
Current : 5%

5.5%
Factor levels
6.0% Or Stockists
Treatments
6.5%

Test Units

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 Will higher trade discount increase sale?

INDEPENDENT VARIABLES

Factor Trade discount DEPENDENT

VARIABLE
Advertising exp.

Ability of salesman
Confounding Sale
variables Market potential

------------

Issue in assessing cause-effect relationship is:

How to control effect of confounding variables on dependent variable?
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Techniques to control effect
of confounding variables

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Techniques to control effect of confounding variables

Randomisation

Matching test units

(Blocking)

Control group

Blinding

Counter balancing
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 Randomisation

Test units are assigned to treatments randomly

• Effect of confounding variables on dependent variables is

Averaged
• Easiest but least effective in controlling effect of confounding
variables

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 Blocking

• Blocks of test units are made based on confounding variables

• Test units from each block is selected in sample
• Treatments are assigned to test units by randomisation

FACTOR
Territories 1% cash discount to 1.5% cash discount
(Blocks) stockist to stockist
Urban
Randomisation

Rural
Randomisation

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 Control Group

• Two groups of test units are made by randomisation

• Treatment is given to only one group. Such a group is
called ‘Experimental Group’. Other group is called
‘Control Group’
• Data on Control Group gives effect of confounding variables
• Data on Experimental Group gives effect of confounding
variables& treatments

Control Group Experimental Group

PLACEBO DRUG

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 Symbols in causal designs
We will use following symbols in studying
types of experimental designs:
X = Objects are exposed to treatment
O = Observation of dependent variable.
Subscripts will be given to differentiate
observations (O1, O2,……)
R = Random assignment of treatments

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 1. After-only without control
group
• This design is
XO1
• Objects are exposed to treatment &
observations are taken after exposure. For e.g.:
– Cash discount 0f 2% is given to stockists & their
sales after discount are observed.
• Suitable when standard of comparison is
known

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 2. Before-After without Control
Group
• This design is
O1 X O2
• This design offers comparison of same
object before & after treatment
• Treatment effect is (O2 – O1)
• Assumed that effect of confounding
variables before and after is same

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3. After only with One Control Group with
Randomization

Experimental Group R X O1

Control Group R O2

• Treatment effect is (O1 – O2)

• Used when groups pre-treatment observations
are not possible or equal

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4. Before-After with One Control Group

Experimental group R O1 X O2

Control Group R O3 O4

• Treatment effect is (O2 – O1) – (O4 – O3)

• Allows for slightly unequal groups in terms
of confounding variables (i.e. O1 ≠ O3)

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 Complex Designs
• These are statistical designs
• These designs are:
– Completely Randomized Design (CRD)
– Randomized Block Design (RBD)
– Factorial Design
– Latin Square Design

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 1. Completely Randomized
Design
• In this design, units are randomly assigned to
treatments
• Factor is manipulated. For e.g.
– Four training methods for training salesman are to be
tested. There are 40 salesmen in sample. These
salesmen are randomly assigned to training methods.
Their sales are then recorded. Here, training method
is factor. Four methods are treatments. Sale is
dependent variable

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 2. Randomized Block Design
• This is a design in which effect of one
confounding variable is controlled. For
e.g.:
• In previous example, salesman’s previous
experience might have impact on sale
• In such case, groups (blocks) of no. of
years of experience are made and
salesmen from each block are randomly
assigned to four methods. The design will
look as follows:
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 2. Randomized Block Design

Treatm Method 1 Method 2 Method 3 Method 4

Block
Less than 5
years
6 to 10 years

More than 10
years

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 2. Randomized Block Design
• By grouping salesmen into homogeneous
blocks, effect of one known confounding
variable i.e. experience is isolated
• In this design, each block must receive
every treatment

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 3. Factorial Design
• In earlier two designs that we have seen
there was only one factor viz. Training
method
• If we are interested to test the effects of
two or more factors, we use factorial
design

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 3. Factorial Design
• A Factorial design is denoted by levels of each
factor. For e.g.:
– If there are 3 factors where factor 1 has two levels,
factor 2 has four levels & factor 3 has five levels, it is
denoted as 2x4x5
• Effect of each factor on dependent variable is
called ‘Main Effect’
• In addition to measuring main effect, Factorial
design has advantage of measuring interaction
effect between two factors
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 3. Factorial Design
• There are two types of hypothesis viz.
– Main effects on dependent variable are significant
– Interaction effects on dependent variable are
significant

Treatm Method 1 Method 2 Method 3 Method 4

Block (T1) (T2) (T3) (T4)
Less than 5 years 15.0 12.9 25.7 10.4
6 to 10 years 26.7 28.9 22.6 12.7
More than 10 years 10.6 14.5 25.1 11.2

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 Latin Square Design
• When we want to deal with two
confounding variables & one factor with no
interaction between two confounding
variables, we use Latin Square design
• A Latin Square has equal no. of rows and
columns such that an alphabet appears
only once in a row & a column. For e.g.
Latin square of order 3 will be as follows:

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 Latin Square Design

1 2 3

I A B C

II B C A

III C A B

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 Latin Square Design
• Suppose, we feel that no. of years of
experience and academic discipline viz.
Arts, Science, Commerce of salesman are
two confounding variables in estimating
effect of three methods of training on sale,
we will use Latin square design as follows:

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 Latin Square Design
1 2 3 Arts Scien Comme
ce rce

I A B C Less than 5 T1 T2 T3
years

II B C A 6 to 10 T2 T3 T1
years

More than T3 T1 T2
III C A B 10 years

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 Latin Square Design
• Here, no. of levels of confounding
variables and factor should be same

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