PDA

View Full Version : Pareto

Karen
May 18th 2005, 04:37 PM
Hi,
My book presents two versions of the Pareto density function with parameters a and m (I am sorry that I can't use greek letters):
f(x)=(am^a)/(x^(a+1))
and
f(y)=(am^a)/(y+m)^(a+1) where Y=X-m

If you are given the values of a and m and the question asks for the expectation, which one would you use? (the first one is my guess)

When asked any question, how do you know which one is appropriate?

Thanks,
Karen

engelbmj
May 24th 2005, 08:38 AM
I can add 2 more versions of Pareto, from 2 different books, both of which are listed in suggested texts.

Ghahramani
f(x) = c/(x^(n+1))
parameter c, x >= c

Bean
f(x) = (a/b) (1 + x/b)^(-a-1)
parameters a and b

Karen
May 24th 2005, 08:52 AM
So should I know all 5 of these?

I still don't know how to know which one to use.

davenpoa
May 24th 2005, 04:28 PM
So should I know all 5 of these?

I still don't know how to know which one to use.

I have been told that the rule of thumb is to use the two parameter unless it specifies.

Two parameter: F(x) = 1 - (B/(B+X))^a

They use pareto with one parameter and don't tell you if you look at the sample problems. If you recognize it, it has short cuts. Otherwise just do the calculus