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Under what circumstances might you use a one-sided test of hypothesis rather than a two-sided test?
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A one-sided hypothesis test is appropriate in two key situations:
- Directional alternative hypothesis: When the alternate hypothesis does specify a direction, then a one-sided test of hypothesis could be used.
- Asymmetric decision context: When a large difference in one specific direction would lead to the same action as no difference at all, making the other direction irrelevant.
In contrast, two-sided tests are used when differences in either direction are theoretically meaningful or would lead to different decisions. Two-sided tests are generally more conservative and are the default choice when there is no strong prior reason to expect a particular direction of effect.
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