Meng

Your question sounds very complicated, so forgive me if I give a simplistic 
answer. Read our 1987 paper called "a novel approach to co-kriging" which 
explains what is now known as the "non-co-located" cross semi-variogram. You 
can download a copy from my personal website at:

http://drisobelclark.kriging.com/resume/

Follow Publications link. Noel Cressie's book on Statistics for Spatial Data is 
probably a good definitive reference for co-kriging of both co-located and 
non-co-located types, although it is heavily mathematical.

Computationally, it uses all observations on both variables and is faster than 
calculating the ordinary semi-variogram on the larger data set. I cannot speak 
for the software you are using, but that is certainly how ours behaves. 

You are correct that the sill will be biassed downwards if the overall mean is 
estimated. However, the bias should be equal to the variance of the error on 
the estimation of that mean, which should be minimal compared to the variance 
between individual samples -- even for a small data set. 

Isobel

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