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Experimenting in Equilibrium

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  • Stefan Wager
  • Kuang Xu

Abstract

Classical approaches to experimental design assume that intervening on one unit does not affect other units. There are many important settings, however, where this non-interference assumption does not hold, as when running experiments on supply-side incentives on a ride-sharing platform or subsidies in an energy marketplace. In this paper, we introduce a new approach to experimental design in large-scale stochastic systems with considerable cross-unit interference, under an assumption that the interference is structured enough that it can be captured via mean-field modeling. Our approach enables us to accurately estimate the effect of small changes to system parameters by combining unobstrusive randomization with lightweight modeling, all while remaining in equilibrium. We can then use these estimates to optimize the system by gradient descent. Concretely, we focus on the problem of a platform that seeks to optimize supply-side payments p in a centralized marketplace where different suppliers interact via their effects on the overall supply-demand equilibrium, and show that our approach enables the platform to optimize p in large systems using vanishingly small perturbations.

Suggested Citation

  • Stefan Wager & Kuang Xu, 2019. "Experimenting in Equilibrium," Papers 1903.02124, arXiv.org, revised Jun 2020.
    • Handle: RePEc:arx:papers:1903.02124
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    References listed on IDEAS

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    Cited by:

    1. Evan Munro & Xu Kuang & Stefan Wager, 2021. "Treatment Effects in Market Equilibrium," Papers 2109.11647, arXiv.org, revised Jun 2024.

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