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When Deciding Whether or Not to Use a New Predictor

question 43

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When deciding whether or not to use a new predictor, the validity coefficient, the base rate, and the selection ratio should be considered in combination, not independently.


Definitions:

Utility Function

A mathematical representation of how different combinations of goods or services produce levels of happiness or satisfaction for an individual or entity.

Pareto Optimal

A state of allocation of resources in which it is impossible to make any individual better off without making at least one individual worse off, indicating an efficient distribution of goods and resources.

Endowment

The total resources available to an individual or institution, including assets, capabilities, and financial means.

General Equilibrium Analysis

A method in economics that attempts to understand how supply and demand interact across multiple markets simultaneously, and how they reach a state of balance.

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