Abstract

The article focuses on Type I and Type II Error analysis in decision making. Many people associated with the management field argue that one skill crucial to managerial success is the problem-solving skill. It is also suggested that one way managers can improve this skill is to use formal models, methods, and procedures. These developed tools, which help structure problems and analyze available strategies, are often called management science or operations research techniques. Although these tools can provide valuable information, the more sophisticated techniques have certain limitations in real-world applications. The purpose of this article is to demonstrate the usefulness if employing a method that will be referred to as Type I and Type II error analysis. This can serve as a logical aid or conceptual base for structuring certain problems and implicitly analyzing the strategies when a more detailed quantitative analysis has been rejected. Although this tool contains certain elements of the classical hypothesis-testing technique, it is more closely associated with the decision theory area because of the type of inputs used.