Optimal test allocation

Ely, J, Galeotti, A, Jann, O and Steiner, J (2021) Optimal test allocation. Journal of Economic Theory, 193. p. 105236. ISSN 0022-0531

Abstract

A health authority chooses a binary action for each of several individuals that differ in their pretest probabilities of being infectious and in the additive losses associated with two types of decision errors. The authority is endowed with a portfolio of tests that differ in their sensitivities and specificities. We derive a simple necessary condition for optimality of test allocation. In special cases, precision parameters of the allocated test are monotone in the individuals’ types. We characterize the marginal benefit of a test, provide an algorithmic solution for the test-allocation problem and consider the benefits of confirmatory testing.