Compare Bayesian and frequentist decisions
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This question evaluates understanding of Bayesian inference versus frequentist hypothesis testing, decision theory under asymmetric loss, sequential monitoring/optional stopping, and prior elicitation applied to A/B testing within the Statistics & Math domain.
For a binary KPI with Beta(1,1) priors, you observe 10,000 users per arm and 515 vs. 500 conversions. a) Compute the posterior for each arm and the posterior probability that lift>0. b) Define a decision rule based on expected loss with asymmetric costs. c) Contrast the decision with a frequentist test under optional stopping and discuss operational implications (e.g., communicating posterior vs. p‑value, alpha spending). d) How would you set or elicit priors to avoid over‑optimism?
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