Presentation
Using a Bayesian approach to evaluate the accuracy of economies of scope: Examples from Australian public universities
International Congress on Modelling and Simulation
(2015)
Abstract
The point estimate of economies of scope is a nonlinear combination of estimated coefficients
from an empirical model. This estimate usually involves out-of-sample predictions when calculating the
separate costs (as a part of the calculation of economies of scope). These difficulties make it hard to give the
precise prediction and to calculate the standard deviation of this estimate along with its confidence intervals.
In this paper, we demonstrate methods for constructing the confidence interval for economies of scope to
allow researchers to draw inferences from estimated economies of scope. We review the common approaches
such as delta method or bootstrap adopted by previous studies. In contrast to the above approximation
methods, this study also proposes an alternative method, Bayesian approach, to produce full predictive
distribution for this measure with the posterior distribution. To demonstrate these three approaches, we use a
balanced panel data including 37 Australian public universities over the period 2003-12. Our Bayesian
approach uses a quadratic cost function with two outputs. Estimates of economies of scope will be calculated
with the sample data and estimated parameters from the model.
Keywords
- Bayesian inference,
- Delta method,
- Bootstrap,
- Economies of scope,
- Confidence interval,
- Universitites
Disciplines
Publication Date
December, 2015
Location
Gold Coast, Queensland
Citation Information
Liang-Cheng Zhang, Jia-Jia Syu and Andrew C Worthington. "Using a Bayesian approach to evaluate the accuracy of economies of scope: Examples from Australian public universities" International Congress on Modelling and Simulation (2015) Available at: http://works.bepress.com/liang-cheng-zhang/12/