Producer's Risk
Encyclopedia
Producer's risk is the probability
that a good product
will be rejected as a bad product by the consumer
.
It calculates the probability of loss from (1) rejecting a batch which, in fact, should have been accepted, or (2) accepting a batch that, in fact, will be rejected by the customer.
Probability
Probability is ordinarily used to describe an attitude of mind towards some proposition of whose truth we arenot certain. The proposition of interest is usually of the form "Will a specific event occur?" The attitude of mind is of the form "How certain are we that the event will occur?" The...
that a good product
Product (business)
In general, the product is defined as a "thing produced by labor or effort" or the "result of an act or a process", and stems from the verb produce, from the Latin prōdūce ' lead or bring forth'. Since 1575, the word "product" has referred to anything produced...
will be rejected as a bad product by the consumer
Consumer
Consumer is a broad label for any individuals or households that use goods generated within the economy. The concept of a consumer occurs in different contexts, so that the usage and significance of the term may vary.-Economics and marketing:...
.
It calculates the probability of loss from (1) rejecting a batch which, in fact, should have been accepted, or (2) accepting a batch that, in fact, will be rejected by the customer.