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Expected opportunity cost guarantees and indifference zone selection procedures

Expected opportunity cost guarantees and indifference zone selection procedures,10.1109/WSC.2003.1261457,Stephen E. Chick,Boulevard de Constance

Expected opportunity cost guarantees and indifference zone selection procedures   (Citations: 3)
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Selection procedures help identify the best of a finite set of simulated alternatives. The indifference-zone approach focuses on the probability of correct selection, but the expected opportunity cost of a potentially incorrect decision may make more sense in business contexts. This paper provides the first selection procedure that guarantees an upper bound for the expected opportunity cost, in a frequentist sense, of a potentially incorrect selection. The paper therefore bridges a gap between the indifference-zone approach (with frequentist guarantees) and the Bayesian approach to selection procedures (which has considered the opportunity cost). An expected opportunity cost guarantee is provided for all configurations of the mean, and need not rely upon an indifference zone parameter to determine a so-called least favorable configuration. Further, we provide expected opportunity cost guarantees for two existing indifference zone procedures that were designed to provide probability of correct selection guarantees.
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