Describe the Taguchi loss function. Contrast it to the goal-post model

Answer 1

Taguchi measured quality as the variation from the target value of a design specification and then translated that variation into an economic "loss function" that expresses the cost of variation in monetary terms. Taguchi proposed measuring the loss resulting from the deviation from the target by a quadratic function so that larger deviations cause increasingly larger losses.The loss function is:

L(x) = k(x ? T)2

where:
L(x) is the monetary value of the loss associated with deviating from the target, T;
x is the actual value of the dimension; and
k is a constant that translates the deviation into dollars.

The goal-post model assumes that any value within the tolerance range is acceptable, but those outside are not.