Single-sided economic screening models incorporating individual unit misclassification error and risk preference

Screening models are used when it is not technically, physically, or economically feasible to assess a product’s conformance to specifications on a performance variable. Under these circumstances, a screening variable is used to infer the quality of a product with respect to the performance variable. Past research efforts have independently addressed the design of screening inspection plans either in terms of average outgoing quality (AOQ), economic consequences, or individual unit misclassification error (IME). A model and procedure are proposed that integrates the economic consequences associated with a screening inspection plan with the concept of IME and AOQ as a basis for selecting the parameters of an optimal inspection plan. A cost function that realistically reflects the risk preference of a decision maker to the economic consequences of an inspection plan is also proposed. A general methodology, using standardized variables, is used to efficiently derive the optimal screening inspection plan for four different cost functions. A comprehensive empirical study is used to examine the sensitivity of an optimal inspection plan with respect to different cost functions. The results show that the nature of the cost function and its parameters have a significant impact on the screening selection plan and its characteristics.