The Impact of Testing Errors on Value of Information: A Quality Control Example

In this paper the authors extend recent work on the inferential impact of errors in data to a decision-making setting. In the context of a simple quality-control example, they illustrate how errors can cause substantial reductions in the value of information from a sample and uncertainty about error rates can lead to yet further reductions in EVSI. Moreover the authors extend the notion of an equivalent error-free sample size (which indicates the reduction in effective sample size due to errors) from an inferential framework to a decision-making framework and find that as uncertainty about error-rate parameters increases, reductions in effective sample size are even greater for a decision-maker than the inferential measures suggest.