Treatment Allocation with Strategic Agents

Evan Munro

Papers from arXiv.org

Abstract: There is increasing interest in allocating treatments based on observed individual characteristics: examples include targeted marketing, individualized credit offers, and heterogeneous pricing. Treatment personalization introduces incentives for individuals to modify their behavior to obtain a better treatment. Strategic behavior shifts the joint distribution of covariates and potential outcomes. The optimal rule without strategic behavior allocates treatments only to those with a positive Conditional Average Treatment Effect. With strategic behavior, we show that the optimal rule can involve randomization, allocating treatments with less than 100% probability even to those who respond positively on average to the treatment. We propose a sequential experiment based on Bayesian Optimization that converges to the optimal treatment rule without parametric assumptions on individual strategic behavior.

Date: 2020-11, Revised 2023-04
New Economics Papers: this item is included in nep-exp
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2011.06528

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