Decision quality by the loss cost of Type I and Type II errors
| Autor: | Ying‐Hao Chen, Ying‐Chieh Chen, Shui‐Chuan Chen |
|---|---|
| Rok vydání: | 2013 |
| Předmět: |
Performance management
Computer science Strategy and Management media_common.quotation_subject Decision quality General Decision Sciences General Business Management and Accounting System requirements Risk analysis (engineering) Quality (business) Operations management Systems thinking Business and International Management Set (psychology) Type I and type II errors Optimal decision media_common |
| Zdroj: | The TQM Journal. 25:202-220 |
| ISSN: | 1754-2731 |
| DOI: | 10.1108/17542731311299627 |
| Popis: | PurposeThe purpose of this paper is to explore the system requirements model. According to the concept of loss costs of Type I and Type II errors, it can define the optimal decision line, and reduce overall loss costs. Moreover, it can decrease the probability of Type I and Type II error by the systems thinking, and it can effectively reduce overall loss costs.Design/methodology/approachThe paper proposed a system demand model and constructed a decision‐making system thinking model as well as a decision‐making performance management model using the principle of system demand. Types of decision‐making errors were analyzed to set judgments on the error risk and establish a model of improvement evaluation key factors, in order to reduce decision‐making error risk and enhance decision quality. It also constructed the improved decision‐making to assess the key factors, to reduce the risk of making errors in order to improve the quality of decision‐making.FindingsOptimistic decision‐makers (risk takers) tend to make Type II errors, whereas pessimistic decision makers (conservatives) tend to make Type I errors. Financial depressions are the time for optimistic decision makers (risk takers) and boom periods are the time for pessimistic decision makers (conservatives).Originality/valueThe concept of the loss cost of two decision‐making errors and related cost function models were proposed. Decision makers could make decisions with a more stable model, taking into consideration false alarms and the cost function of errors in order to determine the position of the decision‐making line. It could effectively reduce decision‐making error costs and increase the precision of decision‐making. |
| Databáze: | OpenAIRE |
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