Price change and fairness. A marketing researcher wishes to study what factors affect the perceived fairness of a change in the price of an item from its advertised price. In particular, does the type of change in price (an increase or decrease) and the source of the information about the change affect the perceived fairness? In an experiment, 20 subjects interested in purchasing a new rug are recruited. They are told that the price of a rug in a certain store was advertised at $500. Subjects are sent, one at a time, to the store, where they learn that the price has changed. Five subjects are told by a store clerk that the price has increased to $550. Five subjects learn that the price has increased to $550 from the price tag on the rug. Five subjects are told by a store clerk that the price has decreased to $450. Five subjects learn that the price has decreased to $450 from the price tag on the rug. After learning about the change in price, each subject is asked to rate the fairness of the change on a 10-point scale with 1 = "very unfair" to 10 = "very fair."

(a) What are the explanatory variables and the response variables for this experiment?

(b) Make a diagram like Figure 6.1 (page 121) to describe the treatments. How many treatments are there?

(c) Explain why it is a bad idea to have the first five subjects learn from a store clerk that the price has increased to $550, the next five learn that the price hasincreased to $550 from the price tag on the rug, and so on. Instead, the order in which subjects are sent to the store and which scenario they will encounter (type of change and source of information about the change) are determined randomly.