The risk function approach to profit maximizing estimation in direct mailing

Lars Muus, Hiek van der Scheer and Tom Wansbeek
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Tom Wansbeek: Groningen University

No 199914, CCSO Working Papers from University of Groningen, CCSO Centre for Economic Research

Abstract: When the parameters of the model describing consumers' reaction to a mailing are known, addresses for a future mailing can be selected in a profit-maximizing way. Usually, these parameters are unknown and are to be estimated. Standard estimation are based on a quadratic loss function. In the present context an alternative loss function is suggested by the mailing company's profit function. This leads to different estimators and higher expected profit.

Date: 1999
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