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Treatment Allocation with Strategic Agents

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  • Evan Munro

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.

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  • Evan Munro, 2020. "Treatment Allocation with Strategic Agents," Papers 2011.06528, arXiv.org, revised Apr 2023.
    • Handle: RePEc:arx:papers:2011.06528
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    File URL: http://arxiv.org/pdf/2011.06528
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    References listed on IDEAS

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    Cited by:

    1. Daido Kido, 2023. "Incorporating Preferences Into Treatment Assignment Problems," Papers 2311.08963, arXiv.org.

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