Abstract
The purpose of this paper is to derive optimal rules for sequential mastery tests. In a sequential mastery test, the decision is to classify a subject as a master, a nonmaster, or continuing testing and administering another random item. The framework of Bayesian sequential decision theory is used; that is, optimal rules are obtained by minimizing the posterior expected losses associated with all possible decision rules at each stage of testing. The main advantage of this approach is that costs of testing can be taken explicitly into account. The binomial model is assumed for the probability of a correct response given the true level of functioning, whereas threshold loss is adopted for the loss function involved. The paper concludes with a simulation study, in which the Bayesian sequential strategy is compared with other procedures that exist for similar classification decision problems in the literature. Key words: sequential mastery testing, Bayesian sequential rules, binomial distribution, threshold loss, most efficient strategy.