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Treatment Effect Models with Strategic Interaction in Treatment Decisions

Tadao Hoshino and Takahide Yanagi

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Abstract: This study develops identification and estimation methods for treatment effect models with strategic interaction in treatment decisions. We consider models where one's treatment choice and outcome can be endogenously affected by others' treatment choices. We formulate the interaction of treatment decisions as a two-player complete information game with potential multiple equilibria. For this model, under the assumption of a stochastic equilibrium selection rule, we prove that the marginal treatment effect (MTE) from one's own treatment and that from his/her partner's can be separately point-identified using a latent index framework. Based on our constructive identification results, we propose a two-step semiparametric procedure for estimating the MTE parameters using series approximation. We show that the proposed estimator is uniformly consistent with the optimal convergence rate and has asymptotic normality.

New Economics Papers: this item is included in nep-ecm and nep-gth
Date: 2018-10, Revised 2018-10
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Handle: RePEc:arx:papers:1810.08350