Modeling the Conditional Dependence between Discrete and Continuous Random Variables with Applications in Insurance

Abstract

We jointly model amount of expenditure for outpatient visits and number of outpatient visits by considering both dependence and simultaneity by proposing a bivariate structural model that describes both variables, specified in terms of their conditional distributions. For that reason, we assume that the conditional expectation of expenditure for outpatient visits with respect to the number of outpatient visits and also, the number of outpatient visits expectation with respect to the expenditure for outpatient visits is related by taking a linear relationship for these conditional expectations. Furthermore, one of the conditional distributions obtained in our study is used to derive Bayesian ..