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Using Receiver Operating Characteristic (ROC) Analysis to Evaluate Information-Based Decision-Making

Using Receiver Operating Characteristic (ROC) Analysis to Evaluate Information-Based Decision-Making
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Author(s): Nan Hu (University of Utah, USA)
Copyright: 2019
Pages: 13
Source title: Advanced Methodologies and Technologies in Business Operations and Management
Source Author(s)/Editor(s): Mehdi Khosrow-Pour, D.B.A. (Information Resources Management Association, USA)
DOI: 10.4018/978-1-5225-7362-3.ch057

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Abstract

Business operators and stakeholders often need to make decisions such as choosing between A and B, or between yes and no, and these decisions are often made by using a classification tool or a set of decision rules. Decision tools usually include scoring systems, predictive models, and quantitative test modalities. In this chapter, the authors introduce the receiver operating characteristic (ROC) curves and demonstrate, through an example of bank decision on granting loans to customers, how ROC curves can be used to evaluate decision making for information-based decision making. In addition, an extension to time-dependent ROC analysis is introduced in this chapter. The authors conclude this chapter by illustrating the application of ROC analysis in information-based decision making and providing the future trends of this topic.

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