Scandinavian Working Papers in Business Administration

Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science

No 2015/8: Beta-creaming

Jostein Lillestøl () and Richard Sinding-Larsen ()
Additional contact information
Jostein Lillestøl: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Richard Sinding-Larsen: Dept. of Geology and Mineral Resources Engineering, Norwegian University of Science and Technology, Postal: Norwegian University of Science and Technology, Department of Geology and Mineral Resources Engineering, Sem Sælands veg 1, N-7491 Trondheim, Norway

Abstract: This paper considers sampling proportional to expected size from a partly unknown distribution. The applied context is the exploration for undiscovered resources, like oil accumulations in different deposits, where the most promising deposits are likely to be drilled first, based on some geologic size indicators (“creaming”). A size distribution within the Beta-class turns out to have nice analytical features in this context, and fits available data reasonably well, after rescaling. The theoretical and practical consequences for the accumulation of knowledge on the underlying distribution based on this scheme, named Beta-creaming, are explored in some detail.

Keywords: Beta distribution; sampling proportional to size; resource estimation

JEL-codes: C00; C10; C13

17 pages, February 9, 2015

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