### ROC Dominant Score Cutoff Strategies

Dominant Score Cutoff Strategies

The purpose of this research is to develop new results for

(1) the equivalence of statistical, business and economic

dominance in risk scoring,

(2) dominant risk scoring strategies in the presence of

non-dominant scores, and

(3) the effect of Bayesian score combination on dominant

risk scoring strategies.

One can show that there is ROC dominance if and only if there

is dominance of expected profits or efficient frontiers that

involve different business measures such as profit/volume

tradeoffs. If there is no such dominance, an intersection of

the ROC curves for two different scores nevertheless yields

a dominant strategy for use of the different scorecards and

the cutoffs. Finally, we show that a Bayesian combination of

the two scores leads to a dominant ROC curve with a single

dominant strategy.

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