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A Simple Rational Expectations Model of the Voltage Effect

Author

Listed:
  • Omar Al-Ubaydli
  • Chien-Yu Lai
  • John A. List

Abstract

The “voltage effect” is defined as the tendency for a program’s efficacy to change when it is scaled up, which in most cases results in the absolute size of a program’s treatment effects to diminish when the program is scaled. Understanding the scaling problem and taking steps to diminish voltage drops are important because if left unaddressed, the scaling problem can weaken the public’s faith in science, and it can lead to a misallocation of public resources. There exists a growing literature illustrating the prevalence of the scaling problem, explaining its causes, and proposing countermeasures. This paper adds to the literature by providing a simple model of the scaling problem that is consistent with rational expectations by the key stakeholders. Our model highlights that asymmetric information is a key contributor to the voltage effect.

Suggested Citation

  • Omar Al-Ubaydli & Chien-Yu Lai & John A. List, 2023. "A Simple Rational Expectations Model of the Voltage Effect," NBER Working Papers 30850, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30850
    Note: EEE PE POL
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    References listed on IDEAS

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    1. Omar Al‐Ubaydli & John A. List & Dana Suskind, 2020. "2017 Klein Lecture: The Science Of Using Science: Toward An Understanding Of The Threats To Scalability," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(4), pages 1387-1409, November.
    2. Abhijit Banerjee & Rukmini Banerji & James Berry & Esther Duflo & Harini Kannan & Shobhini Mukerji & Marc Shotland & Michael Walton, 2017. "From Proof of Concept to Scalable Policies: Challenges and Solutions, with an Application," Journal of Economic Perspectives, American Economic Association, vol. 31(4), pages 73-102, Fall.
    3. Hallsworth, Michael & List, John A. & Metcalfe, Robert D. & Vlaev, Ivo, 2017. "The behavioralist as tax collector: Using natural field experiments to enhance tax compliance," Journal of Public Economics, Elsevier, vol. 148(C), pages 14-31.
    4. Al-Ubaydli, Omar & Lee, Min Sok & List, John A. & Mackevicius, Claire L. & Suskind, Dana, 2021. "How can experiments play a greater role in public policy? Twelve proposals from an economic model of scaling," Behavioural Public Policy, Cambridge University Press, vol. 5(1), pages 2-49, January.
    5. Omar Al-Ubaydli & John A. List & Danielle LoRe & Dana Suskind, 2017. "Scaling for Economists: Lessons from the Non-Adherence Problem in the Medical Literature," Journal of Economic Perspectives, American Economic Association, vol. 31(4), pages 125-144, Fall.
    6. Omar Al-Ubaydli & John A. List & Dana L. Suskind, 2017. "What Can We Learn from Experiments? Understanding the Threats to the Scalability of Experimental Results," American Economic Review, American Economic Association, vol. 107(5), pages 282-286, May.
    7. Neal S Young & John P A Ioannidis & Omar Al-Ubaydli, 2008. "Why Current Publication Practices May Distort Science," PLOS Medicine, Public Library of Science, vol. 5(10), pages 1-5, October.
    8. Karthik Muralidharan & Paul Niehaus, 2017. "Experimentation at Scale," Journal of Economic Perspectives, American Economic Association, vol. 31(4), pages 103-124, Fall.
    9. Al-Ubaydli, Omar & Lee, Min Sok & List, John A. & Mackevicius, Claire L. & Suskind, Dana, 2021. "A rejoinder: ‘How can experiments play a greater role in public policy? Twelve proposals from an economic model of scaling’," Behavioural Public Policy, Cambridge University Press, vol. 5(1), pages 125-134, January.
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    1. Jana S. Hamdan & Tim Kaiser & Lukas Menkhoff & Yuanwei Xu, 2024. "Scaling Financial Education Among Micro-Entrepreneurs: A Randomized Saturation Experiment," CESifo Working Paper Series 11431, CESifo.

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    More about this item

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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