In this article, we study the problem of parameter estimation for measurement error models by combining the Bayes method with the instrumental variable approach, deriving the posterior distribution of parameters under different priors with known and unknown variance parameters, respectively, and calculating the Bayes estimator (BE) of the parameters under quadratic loss. However, it is difficult to obtain an explicit expression for BE because of the complex multiple integrals involved. Therefore, we adopt the linear Bayes method, which does not specify the form of the prior and avoids these complicated integral calculations, to obtain an expression for the linear Bayes estimator (LBE) for different priors. We prove that this LBE is superior to the two‐stage least squares estimator under the mean squared error matrix criterion. Numerical simulations show that our LBE is very close to the real parameter whether the variance parameters are known or unknown, and it gradually approaches BE as the sample size increases. Our results indicate that this instrumental variable approach is valid for measurement error models.
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