A Bayesian Approach to Reliability Estimation Using a Loss Function

A Bayesian estimate of reliability for the exponential case is developed which utilizes the basic notion of loss in estimation theory. Since the loss associated with overestimation is usually greater than the loss associated with underestimation of reliability, the loss function can be a useful tool. The loss function and prior distribution of reliability presented are sufficiently flexible to be compatible with many situations in which reliability estimates are require. When no prior information is at hand and a symmetric loss is used, the resulting estimate is seen to be the minimum variance unbiased estimate of reliability. This agreement gives some credibility to the precision of the estimation approach.