Is signal detection theory fundamentally flawed? A response to Balakrishnan (1998a, 1998b, 1999)

For nearly 50 years, signal detection theory (SDT; Green & Swvets, 1966; Macmillan & Creelman, 1991) has been of central importance in the development of psychophysics and other areas of psychology. The theory has recently been challenged by Balakrishnan (1998b), who argues that, within SDT, an alternative index is "better justified" than d' and who claims to show (1998a, 1999) that SDT is fundamentally flawed and should be rejected. His evidence is based on new nonparametric measures that he has introduced and applied to experimental data. He believes his results show that basic assumptions of SDT are not supported-in particular, that payoff and probability manipulations do not affect the position of the decision criterion. In view of the importance of SDT in psychology, these claims deserve careful examination. They are critically reviewed here. It appears that it is Balakrishnans arguments that fail, and not SDT