Treatment Effects in Market Equilibrium

Munro, Evan; Kuang, Xu; Wager, Stefan

doi:10.1257/aer.20230039

Abstract

Policy-relevant treatment effect estimation in a marketplace setting requires assessing both the direct treatment benefit and spillovers induced by changes to the market equilibrium. We show how to identify and estimate policy-relevant treatment effects using a unit-randomized trial run within a single large market. A Bernoulli-randomized trial allows consistent estimation of direct effects, and of treatment-heterogeneity measures that enable welfare-improving targeting. Estimating spillovers鈥攁s well as providing confidence intervals for the direct effect鈥攔equires estimates of price elasticities, which we provide using an augmented experimental design. We illustrate our results using a simulation calibrated to a conditional cash-transfer experiment in the Philippines.

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