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Reducing Marketplace Interference Bias Via Shadow Prices

Author

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  • Ido Bright
  • Arthur Delarue
  • Ilan Lobel

Abstract

Marketplace companies rely heavily on experimentation when making changes to the design or operation of their platforms. The workhorse of experimentation is the randomized controlled trial (RCT), or A/B test, in which users are randomly assigned to treatment or control groups. However, marketplace interference causes the Stable Unit Treatment Value Assumption (SUTVA) to be violated, leading to bias in the standard RCT metric. In this work, we propose techniques for platforms to run standard RCTs and still obtain meaningful estimates despite the presence of marketplace interference. We specifically consider a generalized matching setting, in which the platform explicitly matches supply with demand via a linear programming algorithm. Our first proposal is for the platform to estimate the value of global treatment and global control via optimization. We prove that this approach is unbiased in the fluid limit. Our second proposal is to compare the average shadow price of the treatment and control groups rather than the total value accrued by each group. We prove that this technique corresponds to the correct first-order approximation (in a Taylor series sense) of the value function of interest even in a finite-size system. We then use this result to prove that, under reasonable assumptions, our estimator is less biased than the RCT estimator. At the heart of our result is the idea that it is relatively easy to model interference in matching-driven marketplaces since, in such markets, the platform mediates the spillover.

Suggested Citation

  • Ido Bright & Arthur Delarue & Ilan Lobel, 2022. "Reducing Marketplace Interference Bias Via Shadow Prices," Papers 2205.02274, arXiv.org, revised Mar 2024.
  • Handle: RePEc:arx:papers:2205.02274
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    File URL: http://arxiv.org/pdf/2205.02274
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    References listed on IDEAS

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    1. Ramesh Johari & Hannah Li & Inessa Liskovich & Gabriel Y. Weintraub, 2022. "Experimental Design in Two-Sided Platforms: An Analysis of Bias," Management Science, INFORMS, vol. 68(10), pages 7069-7089, October.
    2. Chin Alex, 2019. "Regression Adjustments for Estimating the Global Treatment Effect in Experiments with Interference," Journal of Causal Inference, De Gruyter, vol. 7(2), pages 1-36, September.
    3. Chin Alex, 2019. "Regression Adjustments for Estimating the Global Treatment Effect in Experiments with Interference," Journal of Causal Inference, De Gruyter, vol. 7(2), pages 1-36, September.
    4. David Holtz & Ruben Lobel & Inessa Liskovich & Sinan Aral, 2020. "Reducing Interference Bias in Online Marketplace Pricing Experiments," Papers 2004.12489, arXiv.org.
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    Cited by:

    1. Ariel Boyarsky & Hongseok Namkoong & Jean Pouget-Abadie, 2023. "Modeling Interference Using Experiment Roll-out," Papers 2305.10728, arXiv.org, revised Aug 2023.
    2. Cortez-Rodriguez Mayleen & Eichhorn Matthew & Yu Christina Lee, 2023. "Exploiting neighborhood interference with low-order interactions under unit randomized design," Journal of Causal Inference, De Gruyter, vol. 11(1), pages 1-36, January.
    3. Shan Huang & Chen Wang & Yuan Yuan & Jinglong Zhao & Brocco & Zhang, 2023. "Estimating Effects of Long-Term Treatments," Papers 2308.08152, arXiv.org, revised Dec 2024.

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