Abstract
Abstract The cost of an electric generating unit or other piece of capital equipment should depend on several unit-specific attribtes. Some of these attributes (such as capacity) can be observed without error, but others (such as reliability or efficiency) cannot be. This study is concerned with situations in which estimates of key unobservable quality attributes can be obtained from time series data on actual performance. Adopting a measurement error perspective, a consistent (adjusted least-squares) technique for using such estimates as independent variables in cross-section regression analysis is derived. Our technique is applied to the estimation of a construction cost function for coal-fired electric generating units.
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