Dr.

Sridhar Vaithianathan
Associate Professor (Analytics& IT)
Institute of Management Technology,
Hyderabad

sridhar.v@imthyderabad.edu.in
sridhar.vaithianathan@gmail.com Mobile: 99899 04245
 ONE WAY - ANOVA Table

Source of Sum of Degrees of Mean p-

Variation Squares Freedom Square F Value
SSTR MSTR
Treatments SSTR k-1 MSTR 
k-1 MSE
SSE
Error SSE nT - k MSE 
nT - k

Total SST nT - 1

SST’s degrees of freedom

SST is partitioned
(d.f.) are partitioned into
into SSTR and SSE.
SSTR’s d.f. and SSE’s d.f.
 TWO WAY Analysis of Variance

 Factorial Experiments
 Factorial Experiments

 In some experiments we want to draw conclusions

about more than one variable or factor.
 Factorial experiments and their corresponding
ANOVA computations are valuable designs when
simultaneous conclusions about two or more factors
are required.
 The term factorial is used because the experimental
conditions include all possible combinations of the
factors.
 For example, for a levels of factor A and b levels of
factor B, the experiment will involve collecting data
on ab treatment combinations.
 Two-Factor Factorial Experiment

 ANOVA Procedure

• We again partition the sum of squares total (SST)

into its sources.

SST = SSA + SSB + SSAB + SSE

• The total degrees of freedom, nT - 1, are partitioned

such that (a – 1) d.f go to Factor A, (b – 1) d.f go to
Factor B, (a – 1)(b – 1) d.f. go to Interaction, and
ab(r – 1) go to Error.

© 2011 South-Western/Cengage Learning. All Rights Reserved Slide 5

 Two-Factor Factorial Experiment

Source of Sum of Degrees of Mean p-

Variation Squares Freedom Square F Value
SSA MSA
Factor A SSA a-1 MSA 
a -1 MSE
SSB MSB
Factor B SSB b-1 MSB 
b -1 MSE
SSAB MSAB
Interaction SSAB (a – 1)(b – 1) MSAB 
( a  1)( b  1) MSE
SSE
Error SSE ab (r – 1) MSE 
ab( r  1)

Total SST nT - 1

© 2011 South-Western/Cengage Learning. All Rights Reserved Slide 6

 Two-Factor Factorial Experiment

 Step 1 Compute the total sum of squares

a b r
SST =  ijk
( x  x )
i 1 j 1 k 1
2

 Step 2 Compute the sum of squares for factor A

a
SSA = br  ( xi .  x )2
i 1

 Step 3 Compute the sum of squares for factor B

b
SSB = ar  ( x . j  x )2
j 1
 Two-Factor Factorial Experiment

 Step 4 Compute the sum of squares for interaction

a b
SSAB = r  ( xij  xi .  x . j  x )2
i 1 j 1

 Step 5 Compute the sum of squares due to error

SSE = SST – SSA – SSB - SSAB

a = No. of levels in Factor A

b = No. of levels in Factor B
r = no. of replications
nT = total no. of observations taken in the experiment
(ie) a.b.r
 Two-Factor Factorial Experiment

 Example: State of Ohio Wage Survey

A survey was conducted of hourly wages
for a sample of workers in two industries
at three locations in Ohio. Part of the
purpose of the survey was to
determine if differences exist
in both industry type and
location. The sample data are shown
on the next slide.
 Two-Factor Factorial Experiment

 Example: State of Ohio Wage Survey

Industry Cincinnati Cleveland Columbus

I $12.10 $11.80 $12.90
I 11.80 11.20 12.70
I 12.10 12.00 12.20
II 12.40 12.60 13.00
II 12.50 12.00 12.10
II 12.00 12.50 12.70

© 2011 South-Western/Cengage Learning. All Rights Reserved Slide 10

 Two-Factor Factorial Experiment

 Factors
•Factor A: Industry Type (2 levels)
•Factor B: Location (3 levels)
 Replications
•Each experimental condition is repeated 3 times
 Two-Factor Factorial Experiment

 ANOVA Table

Source of Sum of Degrees of Mean

Variation Squares Freedom Square F p-Value

Factor A .50 1 .50 4.19 .06

Factor B 1.12 2 .56 4.69 .03
Interaction .37 2 .19 1.55 .25
Error 1.43 12 .12

Total 3.42 17

© 2011 South-Western/Cengage Learning. All Rights Reserved Slide 12

 Two-Factor Factorial Experiment

 Conclusions Using the Critical Value Approach

•Industries: F = 4.19 < Fa = 4.75
Mean wages do not differ by industry type.
•Locations: F = 4.69 > Fa = 3.89
Mean wages differ by location.
•Interaction: F = 1.55 < Fa = 3.89
Interaction is not significant.

© 2011 South-Western/Cengage Learning. All Rights Reserved Slide 13

 Two-Factor Factorial Experiment

 Conclusions Using the p-Value Approach

•Industries: p-value = .06 > a = .05
Mean wages do not differ by industry type.
•Locations: p-value = .03 < a = .05
Mean wages differ by location.
•Interaction: p-value = .25 > a = .05
Interaction is not significant.

© 2011 South-Western/Cengage Learning. All Rights Reserved Slide 14

 PRACTICE and RECAP
PRACTICE MAKETH PERFECT
Refer: Reference Books

Anderson, Sweeny, Williams, “Statistics for Business

and Economics” Cengage Learning, 12th Edition.
Ch 13

David M. Levine, David F. Stephan, Kathryn A. Szabat

(2016). “Statistics for Managers Using Microsoft Excel”,
Pearson Publisher, 8th Edition.
CH 11