Trade-Off Analysis vs. Constrained Optimization with an Economic Control Chart Model
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With respect to economic control chart design, this paper demonstrates that trade-off analysis following optimization has many advantages over optimization constrained by average run length. While researchers of economic design have been aware of the relatively flat cost response surface in the region of optimality, we demonstrate how this property may be exploited for improved control chart design. The flat cost surface tends to increase sharply beyond certain ARL values, causing pre-specified ARL constraints to sometimes result in substantially higher that optimal costs. Results from our trade-off approach show that, by focusing on the flat cost area, vast improvements in ARL characteristics can be obtained with minimal cost penalties.
- Economics and Cost Analysis