Alpha (Type I Error)
The 'Courtroom' Problem
Think of a statistical test like a trial. We assume the Null Hypothesis is 'Innocent' until proven 'Guilty'.
- Type I Error (): Convicting an innocent person. (False Discovery)
- Type II Error (): Letting a guilty person go free. (Missed Discovery)
The standard implies that convicting an innocent person is 4 times worse than letting a criminal walk free. But is this ratio true for every experiment?
The Mathematical Fix
Daniel Lakens argues that we should not use a 'magic number' like 0.05. Instead, we should minimize the Total Cost of Error based on our specific situation.
Where C1, C2 are the costs of each error type.
Use the tool below to find your Optimal Alpha by balancing these costs.
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Case A: Particle Physics
Claiming a new particle exists when it doesn't is catastrophic.
Cost Ratio: 100:1
Result: Extreme rigor ().
Case B: The A/B Test
A False Positive just means we change a button color unnecessarily. A Missed Discovery means we lose revenue.
Cost Ratio: 1:1
Result: Relaxed Evidence ().
Case C: The Standard
Fisher's legacy convention.
Cost Ratio: 4:1
Result: .