Shrinkage estimation of P(X<Y) in the exponential case with common location parameter

Abstract.

We consider the problem of estimating R=P(X<Y) where X and Y have independent exponential distributions with parameters θ and λ respectively and a common location parameter μ. Assuming that there is a prior guess or estimate R ₀, we develop various shrinkage estimators of R that incorporate this prior information. The performance of the new estimators is investigated and compared with the maximum likelihood estimator using Monte Carlo methods. It is found that some of these estimators are very successful in taking advantage of the prior estimate available.