THE IMPACT OF TESTING ERRORS ON VALUE OF INFORMATION - A QUALITY-CONTROL EXAMPLE

In this article, we extend recent work on the inferential impact of er rors in data to a decision-making setting. In the context of a simple quality-control example, we illustrate how errors can cause substantia l reductions in the value of information from a sample and how uncerta inty about error rates can lead to yet further reductions in EVSI. Mor eover, we extend the notion of an equivalent error-free sample size (w hich indicates the reduction in effective sample size due to errors) f rom an inferential framework to a decision-making framework and find t hat as uncertainty about error-rate parameters increases, reductions i n effective sample size are even greater for a decision maker than the inferential measures suggest.