The Pareto distribution, named after the Italian economist Vilfredo Pareto, is a highly
left skewed distribution. Suppose we assume that session times on a web site for a visitor
has a Pareto distribution with minimum session time = θ seconds while the connection is
established and the first page delivered. The maximum length of the session is dependent on
the degree of interest the visitor has in the material.
Suppose Y1, Y2, . . . , Yn is a random sample of session times of n visitors, where each Yi has
a Pareto density:
fθ(y) = 3θ^3y^(−4), y ≥ θ; and 0, y < θ.
for an unknown θ > 0. We are interested in the estimation of θ.
(e) Derive the value of an that makes an bθ an unbiased estimator of θ.
(f) Find the distribution function of bθ
θ , and use it to explain why bθ
θ is a pivotal quantity.
(g) Using this pivotal quantity, derive a statistic bθL such that P (bθL ≤ θ) = 0.9. That is,
determine a 90% LCB for θ.
(h) Find the method of moments estimator (MOM) of θ. Is this estimator unbiased?