Performance of empirical Bayes estimators of random coefficients in multilevel analysis: Some results for the random intercept‐only model

For a multilevel model with two levels and only a random intercept, the quality of different estimators of the random intercept is examined. Analytical results are given for the marginal model interpretation where negative estimates of the variance components are allowed for. Except for four or five level‐2 units, the Empirical Bayes Estimator (EBE) has a lower average Bayes risk than the Ordinary Least Squares Estimator (OLSE). The EBEs based on restricted maximum likelihood (REML) estimators of the variance components have a lower Bayes risk than the EBEs based on maximum likelihood (ML) estimators. For the hierarchical model interpretation, where estimates of the variance components are restricted being positive, Monte Carlo simulations were done. In this case the EBE has a lower average Bayes risk than the OLSE, also for four or five level‐2 units. For large numbers of level‐1 (30) or level‐2 units (100), the performances of REML‐based and ML‐based EBEs are comparable. For small numbers of level‐1 (10) and level‐2 units (25), the REML‐based EBEs have a lower Bayes risk than ML‐based EBEs only for high intraclass correlations (0.5).