AN ECONOMIC 2-STAGE SCREENING-PROCEDURE WITH A PRESCRIBED OUTGOING QUALITY IN LOGISTIC AND NORMAL-MODELS

An economic two-stage screening procedure based on a dichotomous perfo rmance variable T and a continuous screening variable X is proposed. X is measured first to decide whether an item should be accepted, rejec ted, or additional observations should be taken. If no terminal decisi on is reached, T is then observed to classify the undecided items. Two models are considered; (i) the logistic model, where P(T = 1\X = x) i s assumed to be a logistic function of x, and (ii) the normal model, w here X given T is assumed to be normally distributed. A simple economi c model based on inspection and misclassification costs is constructed . Optimal cutoff values on the screening variable are obtained by mini mizing the expected cost-subject to the constraint that the average ou tgoing quality attains a prespecified level. Solutions are provided fo r both known-parameter and unknown-parameter cases. (C) 1995 John Wile y & Sons, Inc.