Alpha

Alpha is the significance level threshold used in hypothesis testing that represents the probability of making a Type I Error, or the acceptable risk of detecting a false positive result.

Meaning & Context

Commonly set at 0.05 (5%) in A/B testing, alpha defines how much evidence you require before declaring a test result statistically significant. When you set alpha to 0.05, you're stating that you're willing to accept a 5% chance of concluding there's a difference when none actually exists. Lower alpha values (like 0.01) make you more conservative, reducing false positives but requiring stronger evidence to detect true effects.

Why It Matters

Choosing the right alpha level balances your risk tolerance with the ability to detect genuine improvements, directly impacting how you interpret test results and make business decisions. A more stringent alpha (lower value) protects against false positives but requires larger sample sizes and longer test durations. Most A/B testing practitioners use alpha = 0.05 as the industry standard, though high-stakes decisions may warrant more conservative thresholds.

Example

You set alpha at 0.05 for a pricing test, meaning you'll only declare the new price successful if there's less than a 5% probability the observed improvement happened by chance. If your p-value is 0.03, you reject the null hypothesis and implement the change.