Bayesian Fuzzy Regression Analysis and Model Selection: Theory and Evidence

In this study we suggest a Bayesian approach to fuzzy clustering analysis – the Bayesian fuzzy regression. Bayesian Posterior Odds analysis is employed to select the correct number of clusters for the fuzzy regression analysis. In this study, we use a natural conjugate prior for the parameters, and we find that the Bayesian Posterior Odds provide a very powerful tool for choosing the number of clusters. The results from a Monte Carlo experiment and three illustrative applications with economic data are very encouraging.