Utility {psychometric}

Marginal and Total Utility of a Test

Description

Computes the marginal or total utility of a test.

Usage

MargUtil(Rxy, Sy, MXg, COST, Nselected)

TotUtil(Rxy, Sy, MXg, COST, Nselected)

Arguments

Rxy

Correlation of Test X with Criterion Y

Sy

Standard Deviation of Y in monetary units

MXg

Mean of selected group on test X in standard score units

COST

Total cost of testing

Nselected

number of applicants selected

Details

Marginal utility is the gain expected in the outcome (i.e., job performance), in monetary units, for a person from the predictor selected subgroup compared to a person who is randomly selected.

Total utility is the total gain in the outcome (i.e., job performance), in monetary units, expected for those selected using the test.

Value

Marginal or Total Utility of a Test (a numeric value in monetary units)

Note

Computation for marginal and total utility are:

MU <- Rxy*Sy*MXg - COST/Nselected
TU <- Nselected*Rxy*Sy*MXg - COST

The computation of Sy should be done locally (within an organization) and is often difficult.

Author(s)

Thomas D. Fletcher [e-mail]

References

Cascio, W. F. & Aguinis, H. (2005). Applied Psychology in Human Resource Management (6th ed.) Englewood Cliffs, NJ: Prentice-Hall.

Murphy, K. R. & Davidshofer, C. O. (2005). Psychological testing: Principles and applications (5th ed.). Saddle River, NJ: Prentice Hall.

See Also

ClassUtil

Examples

# Rxy = .35
# Each year 72 workers are hired
# SD of performance in dollars is $4000
# 1 out of 10 applicants are selected
# cost per test = $5
# average test score for those selected = 1.76
MargUtil(.35, 4000, 1.76, 720*5, 72)
TotUtil (.35, 4000, 1.76, 720*5, 72)