Posterior Analysis of Inspector Accuracy Available to Purchase

Signal Detection Theory (SDT) has recently been used to evaluate the performance of imperfect inspectors. SDT model is based on a priori probabilities and perceived payoffs and penalties to study inspectors′ behaviour. In this article, Bayes′ theorem is used to compute posterior probabilities of the two types of inspection error. These posterior probabilities give rise to the definition of Receiver Analysis Curves (RAC), which depict the “after the facts” consequences of inspection error. A cost model is also developed that reflects the true benefits and costs of inspection accuracy to the organisation.