TITLE:
Incorporating Uncertain Costs within a Series of Sequential Probability Ratio Tests
AUTHORS:
Conor McMeel, Brett Houlding
KEYWORDS:
Adaptive Utility, Hypothesis Testing, Sequential Analysis, Sequential Probability Ratio Test
JOURNAL NAME:
Open Journal of Statistics,
Vol.6 No.5,
October
21,
2016
ABSTRACT: We consider an extension to Sequential
Probability Ratio Tests for when we have uncertain costs, but also opportunity
to learn about these in an adaptive manner. In doing so we demonstrate the
effects that allowing uncertainty has on observation cost, and the costs
associated with Type I and Type II error. The value of information relating to
modelled uncertainties is derived and the case of statistical dependence
between the parameter affecting decision outcome and the parameter affecting
unknown cost is also examined. Numerical examples of the derived theory are
provided, along with a simulation comparing this adaptive learning framework to
the classical one.