Is eliciting dependency worth the effort? A study for the multivariate Poisson-Gamma probability model

Schwarzenegger, Rafael and Quigley, John and Walls, Lesley (2021) Is eliciting dependency worth the effort? A study for the multivariate Poisson-Gamma probability model. Proceedings of the Institution of Mechanical Engineers, Part O: Journal of Risk and Reliability, 237 (5). pp. 858-867. ISSN 1748-006X (https://doi.org/10.1177/1748006X211059417)

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Abstract

We examine whether it is worthwhile eliciting subjective judgements to account for dependency in a multivariate Poisson-Gamma probability model. The challenge of estimating reliability during product design motivated the choice of model class. For the multivariate Poisson-Gamma model we adopt an empirical Bayes methodology to present an estimator with improved accuracy. A simulation study investigates the estimation error of this estimator for different degrees of dependency and examines the impact of dependency being mis-specified when assessed by subjective judgement. Our theoretical and simulation findings give analysts insights about the value of eliciting dependency.

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