This is three questions dressed up as one and I didn't realize that until I was halfway through answering the first part.
Start by clearly defining the null and alternative hypotheses for the difference in click-through rates between control and test. Then justify the use of a z-test by invoking the Central Limit Theorem for large sample sizes, and finally derive the required sample size using the standard formula for two proportions, incorporating the given significance level and power.
Pro tip: Always consider practical significance alongside statistical significance; a 2 percentage point lift might be statistically significant but not business-relevant depending on baseline CTR and costs. Also, mention that you'd check assumptions like independence and random assignment before proceeding.
Set up the null hypothesis (H0) that there is no difference in click-through rates between control and test, and the alternative hypothesis (H1) that there is a difference (two-tailed) or that test is greater (one-tailed). Specify the parameters: p_c for control and p_t for test.
Explain that since click-through is a binary outcome, the sample proportion follows a binomial distribution. For large samples, the Central Limit Theorem ensures the sampling distribution of the difference in proportions is approximately normal, allowing the use of a z-test.
Use the standard formula for sample size per group for comparing two proportions: n = ( (z_{α/2} + z_β)^2 * (p1(1-p1) + p2(1-p2)) ) / (p2 - p1)^2, where p1 is baseline CTR, p2 = p1 + 0.02, α=0.05, power=0.80.
Assume a baseline CTR (e.g., 10% or 20%) if not given, compute the required sample size per group, and round up to the nearest integer. Mention that if baseline is unknown, use a conservative estimate (e.g., 50%) or pilot data.
State the final sample size and discuss assumptions: random assignment, independence, sufficient sample size for normality, and that the test is two-tailed. Also note that this is a simplified calculation and real-world factors like multiple testing or sequential analysis may require adjustments.
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