Ulric B. and Evelyn L. Bray Social Sciences Seminar
Baxter B125
Treatment Effects in Market Equilibrium
Stefan Wager,
Associate Professor of Operations, Information and Technology,
Stanford Graduate School of Business,
Abstract: When randomized trials are run in a marketplace equilibriated by prices, interference arises. To analyze this, we build a stochastic model of treatment effects in equilibrium. We characterize the average direct (ADE) and indirect treatment effect (AIE) asymptotically. A standard RCT can consistently estimate the ADE, but confidence intervals and AIE estimation require price elasticity estimates, which we provide using a novel experimental design. We define heterogeneous treatment effects and derive an optimal targeting rule that meets an equilibrium stability condition. We illustrate our results using a freelance labor market simulation and data from a cash transfer experiment.
Written with Evan Munro and Kuang Xu.
For more information, please contact Sabrina Hameister by phone at 626-395-4228 or by email at [email protected].